Weekly Newsletter 07/14/13
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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 gapped up on Thursday, easily breaking through the resistance level of 3532 set back on May 22. The rally continued on Friday with the index easily outperforming the DJI and S&P 500 indexes. You will see from the chart that volume remains stubbornly low, with the volume on Thursday barely reaching the 50 day average despite the strong move upward. As a result our trend indicator for the NASDAQ remained on down as the move up wasn't confirmed by strong volume. Nevertheless, as we showed last week, our separate trend reversal signal charts show the rally is continuing so we have taken the unusual step of overriding the trend indicator and set it to 'up' as of last Thursday. I believe this decision will be confirmed this week as earnings season continues and corporations predominately beat earnings expectations. The news late Sunday that China's economy is slowing less than feared and the consequent bounce in Asian markets will surely carry through to the US markets on Monday.

NASDAQ Composite

The low volume kept the number of confirmed breakouts down to 9 for the week. Russian internet company YANDEX (YNDX) was the top performer after breaking out from an almost textbook shallow cup-with-handle pattern on Tuesday and gaining 9.6% by Friday's close. To see why it is almost textbook, look at out tip of the week.
 New Features this Week Additional Value that we added this week

Our entry-level site, essential.breakoutwatch.com received a boost this week with the correction of a bug and the addition of two new features that deliver extra value for the bargain price of just $19.95 a month.

  1. A bug which prevented the Alert Monitor form showing was corrected. That version of the alert monitor is driven by a Google Docs spreadsheet. Although not as fully featured as the alert Monitor on the main site, it does offer real-time indications of when our watchlist stocks have reached their breakout price.
  2. Our EPS trends tool is now available through essential.breakoutwatch.com.
  3. Our Trend Reversal Signals are also available through essential.breakoutwatch.com
This Week's Top Tip Tips for getting the most out of our site

Recognizing a textbook cup-with-handle

Back in 2005 we wrote an article describing why a cup with handle forms forms and the desirable features of the pattern. See Anatomy of a Anatomy of a Cup-with-Handle Chart Pattern

Although  the pattern occurs quite frequently, it is often difficult to identify with just the naked eye, which is why our recognition algorithm is so valuable. The chart of YANDEX (YNDX), which broke out this week, is a good example of a near perfect CwH chart.

yndx

In particular, note that the handle volume is exactly what we should look for with a sharp decline after forming the pivot, and then increasing volume before breakout.

You might also notice that there is in fact a first attempt at a CwH pattern with the pivot at 27.64 on June 18. However, the handle that then formed did not have a well defined volume pattern and the breakout which formed the final pivot at 28.06 was initially weak before the better handle formed leading to a strong breakout.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 15464.3 2.17% 18.01% Up
NASDAQ 3600.08 3.47% 19.23% Up
S&P 500 1680.19 2.96% 17.81% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
3.47 %
NASDAQ Composite
9.26 %
NASDAQ Composite
15.18 %
NASDAQ Composite
19.23 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Music & Video Stores Music & Video Stores Music & Video Stores Music & Video Stores
 Most Improved Industry (by change in technical rank2)
Recreational Vehicles
+ 77
Home Improvement Stores
+ 158
Semiconductor - Memory Chips
+ 158
Toy & Hobby Stores
+ 211
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 9 10.69 5.66% 2.74%
Last Week 2 10.54 10.49% 5.57%
13 Weeks 139 11.23 16.34%
9.8%
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 PZN Pzena Investment Management, Inc. 98
Top Technical PZN Pzena Investment Management, Inc. 98
Top Fundamental MFRM Mattress Firm Holding Corp 42
Top Tech. & Fund. MFRM Mattress Firm Holding Corp 42
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 REGI Renewable Energy Group Inc 59
Top Technical REGI Renewable Energy Group Inc 59
Top Fundamental AWAY HomeAway, Inc. 42
Top Tech. & Fund. AWAY HomeAway, Inc. 42
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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