Welcome to the New Year and what we hope will be a year in which the private investor regains faith in the markets, businesses invest some cash in their future and add to their human resources, and the economy continues to improve.

As always, we focus our attention on the NASDAQ market as that's where experience has shown that the most profitable breakouts come from.

Our trend model for the NASDAQ shows an upward bias as the index begins to break out of a descending triangle pattern. The index attempted to break above the 200 dma on Tuesday but was stymied as it hit the descending resistance line. On Thursday the index rallied again with an accumulation day and on Friday the 200 dma provided support in early trading allowing the index to close the week with a healthy 2.7% gain. It is also encouraging to see volume for the week pickup although the volume trend overall is downward. We really need to see some above average volume to confirm the upward trend.

The number of confirmed breakouts (at the 150% ADV level) rose this week almost to the 13 week average level but the gains were a meager 2.4% by Friday's close. We consider the markets to be still fragile and that those who want to trade in this environment must be nimble.

Our intraday charts are now available on both the 'Alerts Issued Today' page and the 'Alert Monitor'. The charts now include an intraday volume indicator, but note that the volume data can be up to 20 mins delayed. The volume data is shown as a % of the average daily volume so you can immediately see the the level of trading interest in the stock compared to the 50 day average.

We have also modified the email alert to include a link to the intraday chart.

More on the Intraday Chart and the Importance of Volume.

Access to the intraday charts has confused some subscribers so we explain again how to access them.

On each list the symbol gives you access to both a historical chart and the intraday chart. Clicking the symbol gives you access to the historical chart as it has always done. However, if you hover your mouse over the symbol a small pop-up appears with a link in it to the intraday chart, like this:


Importance of Volume

Although we consider a breakout to be successful if the volume on breakout day exceeds 150% of the 50 day average (the O'Neil criterion), our research has shown that breakouts with volume higher than 225% of the ADV have a greater probability of delivering higher returns (see Factors Contributing To Breakout Performance).

By placing a filter on the email alerts you will receive (this is done at the watchlist level) you can control at what volume level you will receive an alert. There are difficulties in using this knowledge however:

• If you wait until the actual volume has reached 225% of ADV, then the price will likely have moved well above the breakout price, causing you to lose some profit.
• If you buy when the breakout price is reached, regardless of volume, then the 225% volume level may not be reached that day.

Our suggestion then is that you buy when a stock reaches its breakout price, regardless of volume (provided the market trend is up)  and sell later in the day, or at the next open, if the target volume is not met. You can verify this strategy with our CwH backtest tool by toggling the 'Sell at open if unconfirmed' option.