Weekly Newsletter 12/16/12
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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  

NASDAQ Composite

The NASDAQ Composite has formed a double-top. The double top is the inverse of a double bottom and will be bearish if the index falls below the pivot at 2958 . With 'fiscal cliff' talks apparently going nowhere, the probability of further decline seems high while uncertainty continues. The outlook could reverse quickly though if a deal is reached, and that seems the most likely eventual outcome. An alternative scenario is that we will see a range bound market as the mood shifts from pessimism to optimism and back again.

Despite the overall loss for the NASDAQ, our breakout stocks performed quite nicely with all of them closing in the black on Friday. The stand out was Infinity Pharmaceuticals Inc.(INFI) which broke out twice this week with a gain of 14% after the first breakout on Monday. How can a stock breakout twice in one week? We examine how that works below.
 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
Understanding When Stocks Appear/Disappear on CwH Watchlist

A common misunderstanding is when and how stocks appear on the CwH watchlists and what happens after a breakout.

INFI, which broke out this week provides a good example of the rules we use. In the chart below we show how INFI formed two CWH patterns with the second one coming just two days after the first.

INFI was listed on our CwH watchlist on November 28, two days after it set its 1st pivot point at 26.01. The two days is important because that is the minimum length we require for a handle. The CwH listing continued until Friday, 12/7. The stock then broke out dramatically on Monday, 12/10, on 7 times average volume and set its second pivot at 27.6. Note that the 2nd pivot was just 2% higher than the former left cup. Because we allow pivots to be up to 5% higher than the left cup, this new pivot effectively lengthened the base of the previous pattern. After this breakout the stock did not appear on the CwH watchlist until 12/12, two days after setting the new pivot. It then immediately broke out again on Thursday, 12/13, and continued to rise on Friday.

We sent an alert on Thursday as the second breakout started because the stock had reappeared on the watchlist on Wednesday evening. If Thursday's breakout had instead occurred on Wednesday we would not have sent an alert because we were not monitoring the stock in real time because it was not on any of our watchlists for that date.


For a fuller analysis of the cup-with-handle (CwH) pattern, see Anatomy of a Cup-with-Handle Chart Pattern.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 13135 -0.15% 7.51% Up
NASDAQ 2971.33 -0.23% 14.06% Up
S&P 500 1413.58 -0.32% 12.4% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
0.18 %
Dow Jones
-4.74 %
Russell 2000
6.8 %
NASDAQ Composite
14.06 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Lumber - Wood Production Lumber - Wood Production Lumber - Wood Production Lumber - Wood Production
 Most Improved Industry (by change in technical rank2)
Drugs Wholesale
+ 63
Drugs Wholesale
+ 126
Music & Video Stores
+ 174
Publishing - Books
+ 166
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 15 3.33% 2.6%
Last Week 6 17.62 1.71% -2.15%
13 Weeks 277 18.85 5.34%
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 RGEN Repligen Corporation 105
Top Technical RGEN Repligen Corporation 105
Top Fundamental XXIA Ixia 56
Top Tech. & Fund. XXIA Ixia 56
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 CTRN Citi Trends, Inc. 50
Top Technical CNH CNH Global NV (ADR) 29
Top Fundamental EPHC Epoch Holding Corp 28
Top Tech. & Fund. EPHC Epoch Holding Corp 28
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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