Weekly Newsletter 12/09/11
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Market Summary Weekly Breakout Report Top Breakout Choices Top 2nd Chances New Features Tip of the Week
Prior editions of this newsletter with our valuable Tips of the Week are available here.
 Weekly Commentary  

Server Maintenance this Weekend

We will be upgrading the software that drives our web server, database and programming languages this weekend. Hopefully any outages will be brief.

Although the major indexes closed higher this week, the NASDAQ chart still shows that there is resistance ahead and we are pessimistic about prospects as we enter the New Year. Apart from the purely technical indicators of resistance (the 200 dma and lower highs), there is also evidence of a global economic slowdown (see Dr. Copper Flashes a Warning). This is reflected in the Dupont earnings warning issued on Friday which said “we are seeing slower growth in certain segments during the 4th Q, driven by global economic uncertainty.” Volatility is also likely to continue as we still do not have a solution to the European sovereign debt crisis, other than promises to control debt levels in the future without a convincing plan to address debt problems in the present. The hope is that if confidence can be restored then there will be a downward trend in the interest rates that the debtor countries must pay if non-European countries such as China can be induced to purchase European sovereign debt. The markets rose on that prospect today, having quickly forgotten that on Thursday they fell because the European Central Bank refused to be a lender of last resort. This report from Bloomberg News shows that hopes that the crisis is resolved are premature given the growth stifling austerity measures in place and the huge debt repayments due early next year.

NASDAQ Composite

The number of breakouts fell to seventeen this week with only modest gains although on average they comfortably outpaced the indexes.

 New Features this Week Additional Value that we added this week

No new features this week

This Week's Top Tip Tips for getting the most out of our site

More about trading in this volatile market.

Last week we showed the importance of setting a tight trailing stop. This week we look at the implications in terms of hold days. Using the CWH with buy on alert MTC strategy, 4 positions and a 4% trailing stop over the last 6 months, our average number of hold days would have been just under 8 days. Our average win would have been just 4.7% and this is shown in the bar chart where almost all our winners are clustered in the 0-10% range.

What this shows is that we are very much in a swing trade market - get in quickly, take your winners and run but don't stay around for the medium or long term (you'll be dead! - JMK). The gains were not spectacular, just 9.3% in 6 months, but way better than the S&P 500. SPQR - small profits , quick returns.

Small profits quick returns 1

Small profits quick returns 2

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12184.3 1.37% 5.24% Up
NASDAQ 2646.85 0.76% -0.23% Up
S&P 500 1255.19 0.88% -0.19% Up
Russell 2000 745.4 1.41% -4.88% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
1.41 %
Dow Jones
10.85 %
Dow Jones
1.94 %
Dow Jones
5.24 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Toy & Hobby Stores Toy & Hobby Stores Specialty Eateries Personal Computers
 Most Improved Industry (by change in technical rank2)
Publishing - Newspapers
+ 48
Publishing - Periodicals
+ 70
Toy & Hobby Stores
+ 175
Toy & Hobby Stores
+ 183
Charts of each industry rank and performance over 12 months are available on the site

1The Market Signal is derived from our proprietary market model. The market model is described on the site.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.
 Weekly Breakout Report How confirmed breakouts performed this week
# of Breakouts
Period Average1
Max. Gain During Period2
Gain at Period Close3
This Week 17 21.08 5.42% 3.08%
Last Week 42 20.69 5.34% 2.34%
13 Weeks 285 21.62 8.74%
1.64%
1The average number of breakouts in each week over the previous 13 weeks.
2This represents the return if each stock were bought at its breakout price and sold at its intraday high.
3This represents the return if each stock were bought at its breakout price and sold at the most recent close.
 Top Breakout Choices Stocks on our Cup-and-Handle list with best expected gain if they breakout
Category
Symbol
Company Name
Expected Gain1
Best Overall PDFS
103
Top Technical BBW Build-A-Bear Workshop, Inc  75
Top Fundamental BOFI BofI Holding, Inc.  54
Top Tech. & Fund. MELI MercadoLibre, Inc.  0
1This is the gain predicted by our Expected Gain model if the stock breaks out. Expected Gains for all cup-and-handle stocks are published on our site.
 Top Second Chances Stocks that broke out this week and are still in buyable range
Category
Symbol
Company Name
Expected Gain1
Best Overall MITI Micromet Inc.  91
Top Technical TAST Carrols Restaurant Group, Inc.  76
Top Fundamental MELI MercadoLibre, Inc.  45
Top Tech. & Fund. MELI MercadoLibre, Inc.  45
1This is the gain predicted by our Expected Gain model after the stock has broken out which uses the volume on breakout as a predictive term. Because the model variance is +/- 38% the expectation can be negative.

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