Weekly Newsletter 03/15/14
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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 three major indexes pulled back this week although our market trend indicators remain positive. These indicators are lagging indicators, but they are quite responsive and I expect them to turn down shortly as the markets continue to trend down in response to uncertainty over Crimea and the collapse of Chinese exports and the Yaun.
NASDAQ Composite
 Weekly Breakout Report  

Despite the drop in the NASDAQ, breakouts put in a strong performance with 22 confirmed breakouts and only 2 closing the week for a loss. The average gain by Friday's close was 8.5%, including the two losers. The strongest performer by week's end was Chimerix,Inc. (CMRX) which broke out from our Squeeze Play list on Wednesday.

Breakouts for Week Beginning 03/10/14
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
03/10/14 NWBO HTF N 7.41 7.85 7.72 4.18 23.89
03/12/14 CMRX SQZ Y 22.10 24.58 27.14 22.81 22.81
03/11/14 RUSS CwH N 20.98 21.51 22.96 9.44 22.16
03/13/14 CALL CwH N 20.04 21.04 22.76 13.57 13.57
03/13/14 PPP CwH N 6.94 7.51 7.8 12.39 12.39
03/10/14 MATR SQZ Y 6.65 7.31 7.21 8.42 11.88
03/13/14 CPE CwH Y 7.73 7.99 8.61 11.38 11.38
03/11/14 EMES SQZ Y 48.31 50.1 53.25 10.23 10.23
03/11/14 KONA CwH N 19.36 20.20 21 8.47 8.47
03/12/14 PAY CwH Y 30.50 32.48 32.81 7.57 7.57
03/11/14 BONA CwH N 7.50 8.04 7.55 0.67 7.2
03/13/14 TVIX HSB Y 7.83 8.02 8.39 7.15 7.15
03/10/14 HRG SQZ Y 12.17 12.5 12.77 4.93 6
03/10/14 GLOG SQZ Y 22.66 23.25 22.78 0.53 4.55
03/11/14 PKOH CwH N 53.06 54.72 55.06 3.77 3.77
03/11/14 MW CwH N 55.10 57.14 53.06 -3.70 3.7
03/12/14 XON SQZ Y 29.61 30.55 30.14 1.79 3.17
03/14/14 JASO CwH Y 11.18 11.42 11.42 2.15 2.15
03/10/14 APAM CwH N 65.17 66.22 62.81 -3.62 1.61
03/12/14 SMTP HTF N 6.28 6.35 6.17 -1.75 1.11
03/12/14 MEI CwH Y 35.13 35.41 30.13 -14.23 0.8
03/14/14 WG CwH N 10.87 10.92 10.92 0.46 0.46

 
 New Features this Week Additional Value that we added this week

I've introduced a new chart browser which includes larger charts and also adds the squeeze indicator to all charts. The new chart browser is accessed from the Chart Browser tab on each watchlist as before.

If you are attempting to browse more  than ten charts, the chart browser will warn you that loading the charts could be slow. This will depend on the speed of your internet connection and computer. You can choose to cancel or continue loading. Usually, you will have applied filters to the list so you only see stocks that match your selection and  alert criteria anyway, so this shouldn't be a problem.

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

"In this business if you're good, you're right six times out of ten. You're never going to be right nine times out of ten." -Peter Lynch

If you had followed our suggeted approach to buying cup-with-handle stocks based on the alerts we provide since January 1 this year, you would have made just 3 trades and had 2 losses for a net return of -3%. You would be pretty disappointed and think that our site and suggested strategy had no value for you. Less than three months, of course, is too short a time frame to judge a strategy, but I wouldn't blame you for being discouraged.

If you had followed the strategy since January 1 2008, a period which include the deepest bear market since the great depression, you would have traded 160 stocks and had 95 winners. That's a 60% success rate, which by Peter Lynch;'s standards is as good as you can expect. And through the benefit of compounding your winnings, you would have made a 720% profit. To see for yourself, run our cup-with-handle backtest with the default parameters (those that we recommend). This is what it will show:

strategy returns

Here's how you do it:
  1. Set your CwH alert filters as follows
    • RS Rank >= 94
    • Minimum Volume 100,000
    • Limit to stocks in industry percentile 40
    • Observe the market trend - do not trade when the signal  is down.
  2. Buy when you receive an alert with a limit price no more than 2% above the alert price (if you miss out, don't worry, there will be another opportunity soon). Commit 100% of your available capital to  the trade. (If you don't,  your capital will not be working hard enough).
  3. Check the close price and volume  at the end of the day. If the stock closed below the breakout price and/or did not meet a volume  target of 175% of ADV, sell at next open.
  4. Each day, set a trailing stop at 7% of the highest intraday price reached to date.
  5. When stopped out, repeat from step 2.
  6. Don't  be discouraged by losses. Expect 40% of your trades to be losers, but the 7% stop loss will protect your capital. 
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 16065.7 -2.35% -3.08% Up
NASDAQ 4245.4 -2.09% 1.65% Up
S&P 500 1841.13 -1.97% -0.39% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
-1.97 %
NASDAQ Composite
6.11 %
NASDAQ Composite
14.06 %
NASDAQ Composite
1.65 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Medical Practitioners Medical Practitioners Manufactured Housing Publishing - Newspapers
 Most Improved Industry (by change in technical rank2)
Silver
+ 46
Synthetics
+ 148
Aluminum
+ 185
Aluminum
+ 197
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 EFUT eFuture Information Technology Inc. 99
Top Technical EFUT eFuture Information Technology Inc. 99
Top Fundamental BWLD Buffalo Wild Wings, Inc. 31
Top Tech. & Fund. PZN Pzena Investment Management Inc 71
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 BONA Bona Film Group Limited 90
Top Technical BONA Bona Film Group Limited 90
Top Fundamental APAM Artisan Partners Asset Management Inc. 23
Top Tech. & Fund. APAM Artisan Partners Asset Management Inc. 23
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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