|Weekly Newsletter 02/10/13|
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This newsletter summarizes the breakout events of the week
and provides additional guidance that does not fit into our
daily format. It is published each weekend.
|Prior editions of this newsletter with our valuable Tips of the Week are available here.|
The NASDAQ Composite outperformed the other major indexes this week. The index tested resistance on Friday at its September high but fell back to close 2 points lower. I continue to expect the index to trade in a range between 3170 and 3196 unless sequestration is modified or delayed, or that the market thinks it will be. I have also taken note of John Mauldin's comment in his Outside the Box commentary this week:
"I am neither a market timer nor the son of a market timer, but I know a lot of these guys. And many whom I pay attention to are flashing major warning signals this week. If I were long this market, I would lay in hedges on what I did not want to sell and put in tight stops on the rest. Maybe a correction will be a rest stop on the way to higher numbers. Short term, emotions can drive markets to what, in retrospect a few years later, seems an obvious extreme, either to the upside or downside."
The number of confirmed breakouts fell to almost half the recent weekly average but still delivered a healthy 3.4% average gain by Friday's close.
|New Features this Week||Additional Value that we added this week|
EPS Current Estimate
The benefits of our EPS trend tool are now part of our watchlists displays with the estimate for the current quarter now being displayed for each symbol on our watchlists.
To make way for this, we removed the MTC column which we no longer recommend as a useful indicator.
Also, the EPS current estimate can now be filtered for and alerts can be selected by this filter also.
At this time, we can't give any guidance as to what, if any, filter value should be used for EPS as we have no history of performance after breakout of stocks with this metric.
CwH Backtest Tool
We added a "slippage" field to the CwH backtest tool. Currently, the breakout price is used as the buy price when the 'Buy on Alert' scenario is run. If used, the slippage value is added to the breakout price to represent a more realistic buy price. The slippage price is expressed in cents. So, for example, if a slippage value of 50 is used, the buy price will be Bop + 0.50.
|This Week's Top Tip||Tips for getting the most out of our site|
Recommended Buy Criteria
We ran a simulation of the CwH Backtest tool to seek the most profitable buy criteria this year using the Buy on Alert strategy. We will run the simulation for the Buy at Open strategy next week.
The simulation was done for 4 positions (meaning that 1/4 of available cash was used for each buy) using all combinations of criteria in the following ranges:
After ranking all the results by Gain/Loss %, the winning values were:
You can replicate these results yourself, using the
values described above. However, there are a couple of
caveats to point out about these results:
In view of our skepticism that the trend since January
can continue, we do not recommend these value for your
buy/sell criteria. Instead, we have run the same
simulations going back to the market bottom of June 1,
2012 which includes two uptrends and one steep downturn.
This should provide a more reliable outcome for a
These values are now the defaults in the CwH backtest
The 4 position strategy since June 1, 2012 provided an
46% gain. During that period two breakouts contributed
outstanding gains: OCN bought at 16.83 on 7/2012 gained
100% and was sold due to the target gain 100%
limit (it would have gained 113% before being sold on a
trailing stop) and TS gained 45%.
Using these parameters with a 1 position portfolio
One Last Caveat
These results were obtained by optimizing the selection criteria over historical data. While the period of the backtest was representative of recent market conditions, the exact sequence of trades represented will never be repeated and so future results using these criteria, could be better or worse.
|Market Summary||Overview of market direction and industry rotation|
|Weekly Breakout Report||How confirmed breakouts performed this week|
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|
|Top Second Chances||Stocks that broke out this week and are still in buyable range|
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