Weekly Newsletter 04/21/13
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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  

Our market trend indicators point down for the the third successive week as the major indexes continue to consolidate. The once best performing NASDAQ Composite has now slipped back and the DJI is now the top performer year-to-date. This rotation out of mostly tech oriented, smaller cap stocks in favor of blue chips indicates investors currently prefer safety over more risky assets.

The NASDAQ found support on Thursday at 3168 and recovered on Friday to within striking distance of the 50 day moving average. A move above that level makes a test of resistance in the 3260-3270 range possible otherwise the index will likely retest the 3168 support level.

NASDAQ Composite

The number of successful breakouts fell to 8 this week, well below the thirteen week average of 13. While successful breakouts are possible when our trend indicators are down, there are always fewer of them and gains are smaller. See this week's Top Tip.

I'm pleased to report that our new server is now stable and there were no incidents this week.
 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

Using Our Trend Indicators will Improve your Returns

Our trend indicators have gone through several iterations of progressive improvement over the ten years we have been providing our service and in their current incarnation provide a reliable tool for detecting significant market turns. Our backtest tools show that relying on our trend indicators will significantly improve your returns over time.

Consider the following results from our CwH tool for the last year when using the market signals to determine when to buy. That is, by opening a position only when the NASDAQ trend indicator is up.

backtest with signals

Now look at the results  without using the market signals, that is by taking a position regardless of our NASDAQ trend indicator.

backtest no signals

So returns were 260% higher when using the market signals.

Special Note: We ran these backtests using just 1 position because that ensures our maximum return.

The reason is that with one position, more of our capital is working for us than with multiple positions. This arises because not all breakouts meet our selection criteria. With one position we commit 100% of our available capital to each buy but with two or more positions we are diluting the amount committed to each position. Because the breakouts can be several days apart, a proportion of our capital can be idle for several days.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 14547.5 -2.14% 11.01% Down
NASDAQ 3206.06 -2.7% 6.18% Down
S&P 500 1555.25 -2.11% 9.05% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
-2.11 %
Dow Jones
6.58 %
Dow Jones
9.02 %
Dow Jones
11.01 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
REIT - Healthcare Facilities REIT - Healthcare Facilities Cement Cement
 Most Improved Industry (by change in technical rank2)
Drugs - Generic
+ 73
Beverages - Wineries & Distillers
+ 140
Toy & Hobby Stores
+ 204
Toy & Hobby Stores
+ 205
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 8 12.23 4.31% 3.43%
Last Week 9 13.31 2.31% -2.01%
13 Weeks 199 13.92 8.18%
-0.64%
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
Category
Symbol
Company Name
Expected Gain1
Best Overall UNTD United Online, Inc. 108
Top Technical UNTD United Online, Inc. 108
Top Fundamental SODA Sodastream International Ltd 42
Top Tech. & Fund. LUFK Lufkin Industries, Inc. 30
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
Category
Symbol
Company Name
Expected Gain1
Best Overall NKTR Nektar Therapeutics 82
Top Technical UNG United States Natural Gas Fund, LP 38
Top Fundamental IMOS ChipMOS Technologies (Bermuda) Ltd 65
Top Tech. & Fund. IMOS ChipMOS Technologies (Bermuda) Ltd 65
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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