Weekly Newsletter 10/11/13
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You are receiving this email because you are or were a BreakoutWatch.com subscriber, or have subscribed to our weekly newsletter. 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.
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 markets are telling us they expect that the debt ceiling will be raised, there will be no default and the Government shutdown will be short-lived with little or no lasting effect on corporate profits. At least, that's what a reading of Thursday's sudden reversal and Friday's follow through would imply. Thursday's action reversed our trend indicator for the DJI and S&P 500 to a positive reading while or NASDAQ indicator had remained positive throughout, although Wednesday's close below the 50 day moving average was ominous at the time.

Despite the market optimism, at the time of writing there is no deal in sight, so uncertainty and volatility will continue until there is one.

NASDAQ Comp.

Friday's action brought out 30 breakout attempts with seven confirmed at the 1.5 times average daily volume level. Solar City (SCTY) opened at 4.8% above its breakout price on growth estimates of 100% in the coming year. If you were quick to catch it before it exceeded our suggested 5% limit then you could have made 10% on the day as it closed 16.5% above its breakout price. Another big mover was Spirit Airlines which closed 11.6% above its breakout price but it gapped up by 5.6% at the open, so was already out of range.
 New Features this Week Additional Value that we added this week

Change to confirmed breakout requirement

Based on new analysis reported below, The volume requirement for a confirmed breakout has been raised to 175% of ADV. This change will be reflected in all reporting on and after Monday,10/14/2013.

New Menu

Not a new feature, but I have re-written the menu code. It should be almost transparent to you but should result in slightly better page load times. This lays a foundation for new functionality and eventually improved support for tablets and phones.
This Week's Top Tip Tips for getting the most out of our site
New Breakout Criteria and Suggested Strategy

I have completed a revision of our suggested breakout strategy. Based on backtest results since April, 2013, I am now suggesting the following breakout criteria for cup-with-handle breakouts:
  • Minimum RS Rank: 94
  • Industry Rank Percentile: top 50% (corresponds to industry ranks <= 112)
  • Confirmation Volume: 175% of average 50 day volume

I now suggest you set your filters on the cup-with-handle watchlist as follows:

suggested cwh filters

This also results in a revision of our suggested trading strategy for cup-with-handle breakouts, which you can read here.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 15237.1 1.09% 16.28% Up
NASDAQ 3791.87 -0.42% 25.58% Up
S&P 500 1703.2 0.75% 19.42% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.09 %
NASDAQ Composite
5.33 %
NASDAQ Composite
15.08 %
NASDAQ Composite
25.58 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Electronics Stores Electronics Stores Toy & Hobby Stores Electronics Stores
 Most Improved Industry (by change in technical rank2)
Information & Delivery Services
+ 130
Wholesale - Other
+ 206
Personal Computers
+ 179
Personal Computers
+ 174
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 12 9.69 5.9% 4.65%
Last Week 23 9.54 9.48% 3.21%
13 Weeks 131 10.38 18.9%
9.88%
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 ZQK Quiksilver, Inc. 89
Top Technical ZQK Quiksilver, Inc. 89
Top Fundamental BIIB Biogen Idec Inc 34
Top Tech. & Fund. NOAH Noah Holdings Limited (ADR) 74
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 79
Top Technical GIVN Given Imaging Ltd. 38
Top Fundamental ORLY O'Reilly Automotive Inc 24
Top Tech. & Fund. CPA Copa Holdings, S.A. 32
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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