Weekly Newsletter 02/03/13
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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  

For the benefit of new readers, we again mention that we focus on the NASDAQ Composite, rather than the  S&P 500 or DJI, in our weekly commentary because the majority of breakouts come from stocks listed on that exchange.

After three attempts, the NASDAQ Composite broke through resistance at 3170 on Friday. The index now faces stronger resistance at 3195, the highest point the index has previously reached since the 2007 collapse. As we said last week, we expect the index to now trade in a range between resistance at 3195 and support at 3170. Our reasoning is that the economy is starting to slow (GDP Declines Slightly in Fourth Quarter) and this slowdown is likely to continue in 2013 as further spending cuts take place and households pay slightly higher taxes due to the expiration of a temporary payroll tax cuts. Regular readers will know I am a fan of Nouriel Roubini who believes the world faces tough sledding in 2013. A counter argument is that the US housing market is recovering and the improvement in perceived household;d wealth could lead to the US Consumer, who represents 70% of GDP, once again putting purchases on their credit card. While this is already happening to some degree, the high unemployment rate, and insecurity for those that have jobs, will continue to hold back consumer spending.


The number of breakouts fell back this week, and their average gain by Friday's close was also reduced, compared to last week. If the NASDAQ trades in the range I expect, then the number of breakouts and their profitability will continue to decline. This may not be the best way to encourage new subscriptions, but I believe my subscribers value objectivity over unrestrained optimism. On the other hand, a stalled or falling market will represent some promising shorting opportunities for followers of our potential breakdown watchlists.

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 New Features this Week Additional Value that we added this week

We have added some features to our EPS Trend tool.
  • there is now a Help  button that pops up a description of the tool and how  to use it
  • we changed the % change  columns to reflect the change from the 7, 30, 60 and 90 day estimates to the current estimate,rather than the change between each estimate
  • added a chart of the change in EPS estimates over the last 90 days. You will see this when clicking the chart icon next to  "current estimate".
AAPL Trend

We are working to link the current EPS estimate to our watchlists and email alerts.

This Week's Top Tip Tips for getting the most out of our site

Last week, we promised the results of an extensive simulation of our backtest tool to determine the criteria for breakout selection that was most appropriate for the current market. During that exercise we discovered a way to make the backtest more representative of real trading conditions. Programming and testing of that change unfortunately could not be completed in time for the newsletter, delayed though it is, and so we hope to bring you the results of that simulation next week.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 14009.8 0.82% 6.91% Up
NASDAQ 3179.1 0.93% 5.29% Up
S&P 500 1513.17 0.68% 6.1% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
0.93 %
Russell 2000
11.89 %
Russell 2000
15.56 %
Russell 2000
7.28 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Building Materials Wholesale Building Materials Wholesale Lumber - Wood Production Lumber - Wood Production
 Most Improved Industry (by change in technical rank2)
Marketing Services
+ 61
Home Furnishings & Fixtures
+ 63
Trucks & Other Vehicles
+ 112
Foreign Regional Banks
+ 171
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 20 19.85 2.67% 1.32%
Last Week 18 20.15 4.56% 3%
13 Weeks 305 21.69 10%
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 97
Top Technical RGEN Repligen Corporation 97
Top Fundamental ULTI The Ultimate Software Group, Inc. 14
Top Tech. & Fund. SLCA U.S. Silica Holdings Inc 64
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 PPC Pilgrim's Pride Corporation 86
Top Technical PPC Pilgrim's Pride Corporation 86
Top Fundamental OCN Ocwen Financial Corporation 45
Top Tech. & Fund. OCN Ocwen Financial Corporation 45
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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