Weekly Newsletter 12/06/13
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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 was the only major index to gain ground this week and it closed above the psychologically resistant level of 4,000. There have been concerns that markets are overvalued but Friday's employment numbers pleased the markets and all three major indexes closed higher. This came as a bit of a surprise to me as I expected the indexes to fall as improving employment means the Fed is closer to  ending QE. Perhaps the markets are endorsing Barry Ritholz' argument that we are not in a bubble:

"There are many “reasonable future outcomes” that would justify current prices. It would only take a small marginal improvement in the economy, or a small uptick in hiring, or heaven help us, even a modest increase in wages -- to increase revenues and drive profits significantly higher. What is currently a somewhat overvalued U.S. market could easily become a fairly valued or even cheap market if the economy were to accelerate modestly."

NASDAQ Comp.
 New Features this Week Additional Value that we added this week

"Squeeze" Added to real Time Alerts.

If a stock on which we issue an alert is in a squeeze, then this will now be shown on each real time alert. You can set your watchlist filters to receive alerts only stocks in a squeeze on each watchlist.  For more information on how to do this see New Features in our November 9 newsletter . Also, see below as we have changed the definition of a squeeze for cup-with-handle patterns.
This Week's Top Tip Tips for getting the most out of our site

Change to Squeeze Definition for CwH Patterns

I have continued my research on how a squeeze may help us identify breakout stocks. After using several statistical techniques to look for the most significant factor in determining if a CwH stock will close above its breakout price on the day of an alert going back to January1,2008 (to include the crash), I found the most significant factor was a combination of squeeze, positive momentum and positive momentum slope. Accordingly, for CwH stocks I've set the squeeze flag to be 'y' if the squeeze is present and both momentum and momentum slope is positive.

Over that time frame, there would have been 2348 alerts with a squeeze present on the day before the alert and with positive momentum and slope. Of those, 1577, or 67%, closed above their breakout price.

Note that I am not saying that these will reach the volume levels necessary for a "confirmed" breakout, but it does represent an opportunity to make a short term profit. This may be of particular interest to options traders.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 16020.2 -0.41% 22.25% Up
NASDAQ 4062.52 0.06% 34.54% Up
S&P 500 1805.09 -0.04% 26.57% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
0.06 %
NASDAQ Composite
11 %
NASDAQ Composite
17.1 %
NASDAQ Composite
34.54 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Toy & Hobby Stores Toy & Hobby Stores Toy & Hobby Stores Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Waste Management
+ 64
Conglomerates
+ 63
Wholesale - Other
+ 190
Medical Practitioners
+ 190
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 7 10.92 13.25% 9.61%
Last Week 4 11.31 5.16% -6.25%
13 Weeks 143 11.62 20.29%
8.68%
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 PAM Pampa Energia S.A. (ADR) 113
Top Technical PAM Pampa Energia S.A. (ADR) 113
Top Fundamental NGVC Natural Grocers by Vitamin Cottage Inc 48
Top Tech. & Fund. NGVC Natural Grocers by Vitamin Cottage Inc 48
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 NSTG NanoString Technologies Inc 89
Top Technical ICGE ICG Group Inc. 51
Top Fundamental HLF Herbalife Ltd. 44
Top Tech. & Fund. HLF Herbalife Ltd. 44
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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