Weekly Newsletter 02/04/12
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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  

The NASDAQ Composite gapped up Friday morning on the strong employment report numbers and broke through resistance at 2879. The rally gained strength through the day and closed up 1.6%. Volume was 30% above the 50 day average showing that the rally had strong support. This week's price action was strong and deserves several comments.
  • Friday was the third accumulation day for the index this week indicating there is now strong buying interest.
  • The nine month chart shows the index is now just outside the 2-standard deviation Bollinger Band. This does not mean that a retrenchment is imminent, but it does mean that upward moves are likely to be less dramatic than we saw in the last four days. A feature of Bollinger Bands is that they widen or contract as price momentum waxes and wanes, so the 2-sd band can track the price move further upwards. It is price that moves the bands, rather than the bands controlling the price!
  • Average daily volume, which was weakening from last October through to the start of the year is now trending up. You can see from the chart that since the start of the year, volumes have been mostly higher than the 50 day average.

NASDAQ Comp.

So the technicals are strong but there are some fundamentals that deserve noting also. From The Big Picture we have the following positives for the US economy:
  • Jan Payroll gains show big upside surprise of 243k, about 100k more than expected, unemployment rate falls to 8.3%
  • 2) ISM services index rises to best since Feb ’11
  • 3) ISM mfr’g up 1 pt but touch less than expected
  • 4) Jan vehicle sales at 14.1mm is best since clunker month in Aug ’09 and the most since May ’08 before that
  • 5) US savings rate rises to 4% from 3.5%
The increasing volume gave us many strong breakouts this week. Twelve stocks gained more than 10% above their breakout price.

B'out Date Symbol Base Last Close Current %
off BOP
Gain at
Intraday High
1/30/2012 TNB CwH 71.4 21.04% 21.21%
2/1/2012 PMFG CwH 27.3 20.37% 20.81%
1/30/2012 UBNT CwH 25 9.60% 19.38%
2/3/2012 CTCT CwH 30.22 9.22% 16.30%
1/31/2012 SAVE CwH 19.21 14.76% 15.59%
2/2/2012 CNQR CwH 57.42 5.38% 14.88%
2/1/2012 MKSI CwH 32.17 4.65% 13.83%
2/2/2012 GSVC CwH 20.45 10.84% 12.36%
1/30/2012 NBIX CwH 9.48 6.28% 11.88%
1/30/2012 ABD CwH 11.01 8.79% 10.28%
2/1/2012 OLP CwH 18.89 6.90% 10.02%
 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

Writing computer algorithms to recognize chart patterns is fundamental to what we do at breakoutwatch. In fact, writing computer algorithms for stock analysis, transportation analysis and econometrics has been one of many joys of my life, so I am naturally very interested in how algorithms increasingly control how markets move. But algorithms don't just control the stock market, they increasingly control many aspects of our lives and getting an edge in their design and execution is becoming paramount, and expensive. You might find this talk at TED interesting, I did. How algorithms shape our world .

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12862.2 1.59% 5.28% Down
NASDAQ 2905.66 3.16% 11.54% Up
S&P 500 1344.9 2.17% 6.94% Down
Russell 2000 831.11 4.04% 12.17% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
4.04 %
Russell 2000
11.34 %
Russell 2000
16.3 %
Russell 2000
12.17 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Toy & Hobby Stores Toy & Hobby Stores Toy & Hobby Stores Specialty Eateries
 Most Improved Industry (by change in technical rank2)
Appliances
+ 59
Major Airlines
+ 77
Residential Construction
+ 185
Surety & Title Insurance
+ 206
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 79 24.38 6.12% 4.37%
Last Week 34 20.69 6.72% 4.69%
13 Weeks 331 26.54 11.45%
8.08%
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 NQ NetQin Mobile Inc (ADR)  113
Top Technical DMAN DemandTec, Inc.  40
Top Fundamental ECHO
66
Top Tech. & Fund. ECHO
66
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 CALD Callidus Software Inc.  94
Top Technical WRLS Telular Corporation  74
Top Fundamental TDG TransDigm Group Incorporated  0
Top Tech. & Fund. TDG TransDigm Group Incorporated  0
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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