Weekly Newsletter 04/20/12
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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  

Our trend signal for the NASDAQ Composite turned down on April 16, joining the signals for the S&P 500 and DJI. The daily chart of the NASDAQ shows that so far the index continues to respect the support level at around 3000 and the 50-day dma, but the index closed below the 50-day average on Friday and the increasing volume on Thursday and Friday suggests strongly that this support level will soon fail. The most likely next move will be downward to test support at 2900.

nasdaq composite
 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

Pullbacks  to Breakout Price Support

This week we look at another suggestion from a subcriber. He wanted to know how confirmed breakouts that pull back to near the breakout price subsequently perform.

For this analysis, I looked at confirmed breakouts that pulled back to within +/- 1% of their breakout price within two weeks of breakout and found support at that level (that is, they never fell below -1% of the BoP during that two weeks). I had available the code that I've used for the last two weeks' analysis which I could quickly adapt so performed an analysis on the assumption that one bought at the support level and then looked at their performance after 1, 2, 3 and 4 weeks.

pullback performance

Pullbacks to BoP Support

WinnersLosers
Week 194.4%5.6%
Week 281.7%18.3%
Week 374.0%26%
Week 471.9%28.1%



These results are preliminary and appear encouraging as they imply that buying pullbacks gives a success rate of 90% in the first week and that after 4 weeks there are still 72% that are above their BoP. However, the results require further analysis in order to develop an entry point strategy.  The weakness with the analysis so far is that I selected stocks that never fall below -1% in the two weeks following breakout and yet in practice once a stock has fallen to within 1% of the BoP we cannot know if it will not fall further.

Time permitting, I'll dig deeper into these promising results next week.

If you have a strategy you would like me to analyse, drop me a line and let me know. This service is free to subscribers.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 13029.3 1.4% 6.64% Down
NASDAQ 3000.45 -0.36% 15.17% Down
S&P 500 1378.53 0.6% 9.62% Down
Russell 2000 804.05 0.97% 8.52% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.4 %
NASDAQ Composite
7.67 %
NASDAQ Composite
13.76 %
NASDAQ Composite
15.17 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Medical Practitioners Sporting Goods Personal Computers Personal Computers
 Most Improved Industry (by change in technical rank2)
Computers Wholesale
+ 69
Major Airlines
+ 111
Photographic Equipment & Supplies
+ 173
Building Materials Wholesale
+ 207
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 12 23.69 4.13% 2.37%
Last Week 14 24.38 67.25% -3.49%
13 Weeks 294 25.23 18.88%
-0.08%
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 SCLN SciClone Pharmaceuticals, Inc. 96
Top Technical SCLN SciClone Pharmaceuticals, Inc. 96
Top Fundamental HF HFF, Inc. 59
Top Tech. & Fund. HF HFF, Inc. 59
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 DAL Delta Air Lines, Inc. 62
Top Technical GGG Graco Inc. 41
Top Fundamental HHC Howard Hughes Corp 27
Top Tech. & Fund. HHC Howard Hughes Corp 27
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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