Weekly Newsletter 06/22/12
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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 is working through a head and shoulders bottom. The chart shows the head, left and right shoulders and neckline. The breakout through the neckline on Tuesday was bullish but Thursday's collapse followed by Friday's strong rally shows how skittish the markets are. Technically speaking, another breakout above the neckline would be bullish but there are reasons to think that such a breakout would be no more reliable than Tuesday's was. We are being assailed by bad news, and the potential for more bad news, in the domestic and global economies at the same time as geopolitical risk is rising: we have news that the US is covertly involved in Syria, uncertainty over the Egyptian elections, a possible strike against Iran as well as the ongoing mess in Afghanistan and Pakistan. Markets react positively or negatively by the minute to news of each event as they perceive the news to imply risk on or risk off, and traders, particularly high frequency algorithmically driven trades, exaggerate the price swings.

These frequent swings add 'noise' to the underlying trend which makes it difficult to identify. Notice how the daily candlesticks to the left of the April high are generally smaller than those to the right of it and recent movements have been particularly large. In this market it is preferable to hold positions for only a few minutes or hours before taking a profit as the market can quickly move against you.

For the nimble breakoutwatch subscriber there are healthy profits to be made in this volatile market. Notice that there were 16 breakouts this week that made an average gain of 7.7% (admittedly this was driven mainly by two stocks, SUNH and ONXX) and last week there were 14 breakouts that made an average gain to their intraday high of 10%, with several making 8% intraday gains. (see our Monitor > Recent Breakouts report).

 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

I am taking a vacation until mid-July. This feature will return on July 20.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12640.8 -0.99% 3.46% Up
NASDAQ 2892.42 0.68% 11.03% Down
S&P 500 1335.02 -0.58% 6.16% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
0.68 %
Dow Jones
-5.72 %
NASDAQ Composite
10.46 %
NASDAQ Composite
11.03 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Building Materials Wholesale Building Materials Wholesale Building Materials Wholesale Recreational Vehicles
 Most Improved Industry (by change in technical rank2)
Publishing - Books
+ 60
Tobacco Products - Other
+ 59
Major Airlines
+ 171
Dairy Products
+ 161
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 16 11.46 7.73% 5.06%
Last Week 14 10.54 9.99% 7.2%
13 Weeks 209 11.85 5.72%
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
Company Name
Expected Gain1
Best Overall BGMD BG Medicine, Inc. 114
Top Technical BGMD BG Medicine, Inc. 114
Top Fundamental CATM Cardtronics, Inc. 38
Top Tech. & Fund. GEOI GeoResources, Inc. 40
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
Company Name
Expected Gain1
Best Overall LGF Lions Gate Entertainment Corp. (USA) 64
Top Technical MLNX Mellanox Technologies, Ltd. 41
Top Fundamental ECHO Echo Global Logistics, Inc. 53
Top Tech. & Fund. ECHO Echo Global Logistics, Inc. 53
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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