Weekly Newsletter 02/28/14
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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 continues to set new highs and generates strong breakouts as it does so. 8 out of the top 10 breakouts this week (see below) were NASDAQ listings. This is fairly typical and why in this section of the newsletter we focus on the NASDAQ Composite index.

A 1 year chart shows that the index will soon begin a consolidation of the gains of the last three weeks, although a few more days of gains are possible. The chart below shows the Keltner Channel (darker blue) overlaid with  the Bollinger Band (lighter) blue. Notice how whenever the  candlesticks move above the Keltner channel and touch the Bollinger Band a consolidation soon begins. As of Friday we are mid-way between the upper Keltner Channel and Bollinger Band and that is why I say a few more days of gains are possible.

NASDAQ Comp

Notice also that 7 out of the top ten came from our new "Squeeze Play" watchlist.

 Weekly Breakout Report How confirmed breakouts performed this week
Breakouts for Week Beginning 02/24/14
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
02/24/14 FNP CwH N 31.31 31.46 34.22 9.29 13.51
02/25/14 HPTX SQZ Y 28.11 31.41 31 10.28 13.38
02/25/14 STCK SQZ Y 19.77 20.8 22.26 12.59 12.59
02/24/14 JOSB SQZ Y 55.85 60.04 62.08 11.15 11.15
02/24/14 XOMA SQZ Y 8.58 8.85 8.36 -2.56 11.07
02/25/14 SCTY SQZ Y 78.65 81.18 84.96 8.02 9.52
02/25/14 FEYE HTF N 79.92 80.00 85.64 7.16 8.9
02/27/14 VE CwH N 17.79 18.89 18.98 6.69 6.69
02/24/14 NVFY SQZ Y 7.36 7.81 7.26 -1.36 6.11
02/27/14 SRNE SQZ Y 10.87 11.52 11.52 5.98 5.98
02/24/14 SEV HTF N 13.13 13.88 11.25 -14.32 5.71
02/26/14 OCRX SQZ Y 15.06 15.7 15.46 2.66 4.25
02/25/14 FORM SQZ Y 6.91 6.94 7.13 3.18 4.05
02/27/14 SNAK CwH N 13.45 13.75 13.89 3.27 3.27
02/28/14 HEES SQZ Y 31.83 32.72 32.72 2.80 2.8
02/27/14 OILT CwH Y 67.47 68.51 69.21 2.58 2.58
02/26/14 BAH CwH N 20.52 20.52 21.03 2.49 2.49
02/26/14 ADHD SQZ Y 24.46 25.02 23.81 -2.66 2.29
02/26/14 PPC CwH Y 17.16 17.36 17.53 2.16 2.16
02/28/14 EVC SQZ Y 6.53 6.63 6.63 1.53 1.53
02/24/14 ECYT CwH N 15.64 15.65 13.17 -15.79 0.64
02/28/14 VLCCF CwH Y 10.32 10.36 10.36 0.39 0.39
02/28/14 PSIX CwH N 73.87 74.10 74.1 0.31 0.31
 New Features this Week Additional Value that we added this week

The "Squeeze Off" price (SOP) will be shown on cup-with-handle breakout alerts starting on Monday. Alerts will continue to be issued when the breakout price (BOP) is met so if you wish to wait for the SOP you will have  to monitor the stock  yourself following the breakout alert. This is discussed further below.

Our CwH Backtest  tool now includes an option to trade at the "Squeeze Off" price. Set the Buy Rule and BuyPrice as shown.
sqz off buy rule

This Week's Top Tip Tips for getting the most out of our site

Trading CwH Alerts at Squeeze Off Price


You will recall from last week's newsletter that breakouts from a cup-with-handle pattern are more likely to be confirmed if the intraday price matches or exceeds the normal CwH breakout price (pivot). However, the Squeeze Off price (SOP) is usually (not always) above the pivot, so if you wait for the SOP you will  give up a little  of your potential  profit. Also, breakouts coinciding with the SOP are rarer, so your opportunities for profits are diminished.

Note also that there is no recommended minimum RS Rank, volume, Industry Rank or market trend requirement to trade the CwH alerts at the SOP price. My suggestion is once the position is open, hold it until it breaches a 7% trailing stop.

Our backtest data shows that under these conditions, since January 1, 2013 you would have traded just 4 position for an average profit of 14% with no losses and an overall gain of 65%.

Trade SOP

In contrast, if  you traded CwH breakouts on BoP under the same conditions (that is with no minimums or market trend requirement) you would have had a similar return but with 8 wins and 11 losses for an average gain of 10.8%.

Trade BOP
Conclusion

Trading CwH breakouts when they reach the Squeeze Off price gives fewer, lower risk trades, which may be  attractive to more risk-averse traders. For the more adventurous, I still recommend trading CwH alerts using the default parameters shown on the CwH backtest page.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 16321.7 1.36% -1.54% Up
NASDAQ 4308.12 1.05% 3.15% Up
S&P 500 1859.45 1.26% 0.6% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.36 %
NASDAQ Composite
6.11 %
NASDAQ Composite
20.01 %
NASDAQ Composite
3.15 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Medical Practitioners Medical Practitioners Publishing - Newspapers Drugs Wholesale
 Most Improved Industry (by change in technical rank2)
General Contractors
+ 70
CATV Systems
+ 110
Aluminum
+ 179
Aluminum
+ 193
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.
 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 CERS Cerus Corporation 101
Top Technical CERS Cerus Corporation 101
Top Fundamental TIS Orchids Paper Products Company 34
Top Tech. & Fund. UIHC United Insurance Holdings Corp. 66
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 VLCCF Knightsbridge Tankers Limited 77
Top Technical OILT Oiltanking Partners, L.P. 39
Top Fundamental OILT Oiltanking Partners, L.P. 39
Top Tech. & Fund. OILT Oiltanking Partners, L.P. 39
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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