Weekly Newsletter 03/03/13
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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  

The NASDAQ Composite moved moderately higher this week and our trend indicator continues to point upwards. During the week the index was range-bound between resistance at 3170 and support at 3112.

NASDAQ Composite

Friday's action (intraday chart below), as the sequester went into effect, showed resilience with the bulls winning the day after the morning's sell-off. This shows that, at least in the short term, the market does not believe the sequester will constrain corporate profits. Note how the market saw 3170 as the upper limit for now. A breakthrough  at that level will signal that more upside is possible.

Nasdaq Intraday

After a strong start to the year, the number of breakouts has fallen back to about  half the recent average. While the markets continue to be range-bound we should not expect a higher number, or better average profits from each breakout. That said, this week's average gains were impacted by the collapse of IMPAC mortgage holdings (IMH) which fell 22% after an initially strong breakout of over 6% above BoP..

 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
The importance of Trailing Stop Loss Orders

The example cited above of IMH's cratering after a 6% gain is an excellent example of how the adjustment of your trailing stops can protect some of your breakout gains.

Our current recommendation for a trailing stop is 7% of the highest intraday high since breakout. (see newsletter 2/10/13). After breakout on Wednesday (BoP 14.27) the share peaked  at 15.17 (a gain of 6.3%). That evening, if a stop loss  order of 7% below 15.17 (14.12) had been placed the potential loss the next day would  have been limited to 1.1% of the breakout price instead of the 21% loss at the day's close.

Our stop loss recommendations have two tiers:
  1. if a stock fails to rise by 5% above the BoP then the stop loss is set at 5% below the BoP.
  2. If the stock rises at least 5%, then the stop less is set at 7% below the highest intraday high since breakout.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 14089.7 0.64% 7.52% Up
NASDAQ 3169.74 0.25% 4.98% Up
S&P 500 1518.2 0.17% 6.45% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
0.64 %
Russell 2000
11.29 %
Russell 2000
12.68 %
Russell 2000
7.7 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Textile Industrial Building Materials Wholesale Building Materials Wholesale Lumber - Wood Production
 Most Improved Industry (by change in technical rank2)
Toy & Hobby Stores
+ 71
Toy & Hobby Stores
+ 183
Toy & Hobby Stores
+ 214
Toy & Hobby Stores
+ 215
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 10 19.08 4.58% 1.37%
Last Week 9 19.62 2.7% -0.11%
13 Weeks 262 20.38 12.08%
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
Company Name
Expected Gain1
Best Overall CRTX Cornerstone Therapeutics, Inc. 103
Top Technical CRTX Cornerstone Therapeutics, Inc. 103
Top Fundamental MTH Meritage Homes Corp 37
Top Tech. & Fund. MTH Meritage Homes Corp 37
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 CNDO Coronado Biosciences Inc 69
Top Technical CNDO Coronado Biosciences Inc 69
Top Fundamental IMPV Imperva Inc 30
Top Tech. & Fund. IMPV Imperva Inc 30
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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