Weekly Newsletter 05/19/13
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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 continues its remarkable ascent with a 1.8% gain for the week, better than the DJI but slightly behind the S&P 500. The index continues to track just within the outer Bollinger Band (2 standard deviations)  for the second week. The steepness of the climb is dizzying but by no means unprecedented since April 2009 when the market's recovery began. While we cannot say when a consolidation/correction will occur we can be sure there will be one. Be on your guard and watch our trend signals for the first sign that they are taking away the punch bowl. A reversal in a trend signal is not a signal to sell, but it is a warning not to open any new positions.

NASDAQ Composite

The NASDAQ's strength is producing some strong breakouts with three from a CwH pattern that gained well over 10%. NOAH has gained 27%, CCIX 24.8% and LRN 14%. Most breakouts in the last week are at or near their intraday highs. Note that all breakouts on this week's list are from a cup-with-handle pattern (CwH).

B'out Date Symbol Base B'Out Price Last Close Current %
off BOP
*Gain at
Intraday High
5/10/2013 NOAH CwH 9.12 11.59 27.08% 27.08%
5/10/2013 CCIX CwH 15.27 19.05 24.75% 24.75%
5/10/2013 LRN CwH 25.97 29.61 14.02% 14.02%
5/13/2013 LOV CwH 8.24 8.92 8.25% 9.22%
5/13/2013 ALNY CwH 25.88 27.44 6.03% 8.85%
5/10/2013 SWFT CwH 15.48 16.84 8.79% 8.79%
5/13/2013 NLNK CwH 15.61 16.68 6.85% 6.85%
5/14/2013 SEIC CwH 29 30.53 5.28% 5.28%
5/10/2013 TZOO CwH 27.71 28.62 3.28% 5.23%
5/13/2013 KERX CwH 8.41 8.04 −4.40% 4.04%
5/14/2013 FIG CwH 7.18 7.45 3.76% 4.04%
5/10/2013 BECN CwH 39.21 40.76 3.95% 3.95%
5/14/2013 RLD CwH 14.99 15.55 3.74% 3.74%
5/14/2013 ZOLT CwH 13.48 12.83 −4.82% 2.82%
5/14/2013 GTY CwH 22.36 22.55 0.85% 1.52%
5/14/2013 PLAB CwH 7.93 7.54 −4.92% 0.13%
 
 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

Two weeks ago, I suggested that if you bought an alert on breakout, then you should hold it provided the day's volume reached at least the 50 day average volume level. I repeated the analysis over the weekend and found no reason to change that suggestion under current market conditions (note that this deviates from our longstanding recommendation of 2.25 times adv, due to the exceptionally strong market this year).

I also performed the analysis for stocks that could be bought at next day's open and found that once again, if the stock closed above its breakout price an volume equal to or greater than the 50 day adv, then the stock could be bought. BUT, a tighter trailing stop of 2% instead of 3% should be used. this suggestion is based on this year's market conditions and will definitely be subject to change in the future.

Our CwH backtest tool shows that using a buy at open strategy with a stop loss of 2% could have earned 20.5%.

buy at open

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 15354.4 1.56% 17.17% Up
NASDAQ 3498.97 1.82% 15.88% Up
S&P 500 1666.12 1.98% 16.82% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
1.98 %
Dow Jones
9.62 %
NASDAQ Composite
22.64 %
Dow Jones
17.17 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Toy & Hobby Stores Toy & Hobby Stores REIT - Healthcare Facilities Cement
 Most Improved Industry (by change in technical rank2)
Broadcasting - Radio
+ 46
Processing Systems & Products
+ 74
Electronics Stores
+ 166
Toy & Hobby Stores
+ 213
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 11.77 4.65% 2.06%
Last Week 14 12 13.87% 11.59%
13 Weeks 189 12.77 11.08%
5.09%
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 HOV Hovnanian Enterprises, Inc. 106
Top Technical HOV Hovnanian Enterprises, Inc. 106
Top Fundamental URBN Urban Outfitters, Inc. 31
Top Tech. & Fund. URBN Urban Outfitters, Inc. 31
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 FIG Fortress Investment Group LLC 99
Top Technical ZOLT Zoltek Companies, Inc. 64
Top Fundamental FIG Fortress Investment Group LLC 99
Top Tech. & Fund. FIG Fortress Investment Group LLC 99
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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