Weekly Newsletter 08/22/14
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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  

I'm back from my travels and pleased that the last two weeks have seen a strong recovery for the NASDAQ Composite. Volume has been below average but that is typical for August so it is not indicative of a weak recovery. On the contrary, the index burst through resistance on Tuesday and closed near its high for the week on Friday. The index is close to the top of the two standard deviation Bollinger Band so we may see a few days of consolidation from here.
nasdaq comp
 Weekly Breakout Report  

Low volumes contributed to there being a drop in the number of confirmed breakouts this week. This is because our standard for a confirmed breakout is that the volume on breakout day must be at least 150% of the 50 day average volume. With volume being generally lower even strong breakouts on price could not meet the volume standard.

Breakouts for Week Beginning 08/18/14
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
08/18/14 NEWM CwH N 15.47 16.45 16.18 4.59 8.4
08/18/14 MSG SQZ Y 61.33 62.72 63.63 3.75 5.98
08/18/14 BLT CwH N 15.09 15.39 15.81 4.77 5.63
08/19/14 FFIV SQZ Y 116.67 120.02 122.09 4.65 5.06
08/21/14 BSTC CwH N 29.55 30.92 30.92 4.64 4.64
08/20/14 WNRL DB N 33.40 34.87 34.92 4.55 4.55
08/19/14 CTRN SQZ Y 21.31 21.53 22.13 3.85 3.85
08/18/14 FDO CwH N 77.25 79.81 79.41 2.80 3.31
08/19/14 RDI CwH N 8.62 8.84 8.71 1.04 2.55
08/19/14 TUES SQZ Y 17.79 17.8 17.09 -3.93 0.11
Weekly Average (10 breakouts) 3.07 4.41

 
 
 New Features this Week Additional Value that we added this week

An alert subscriber spotted an anomaly in the transaction record produced from the CWH Backtest tool where the volume for a breakout was incorrectly recorded. The anomaly arose from the difficulty of adjusting the historical price and volume  for splits and dividends. The method of maintaining the data source for the backtest has now been rewritten as a consequence and I believe we shouldn't have this problem again. Of course, I'm always grateful when these these errors are pointed out so I can improve the quality of my service.

The CWH backtest data should now be correct back to 2009.
 
This Week's Top Tip Tips for getting the most out of our site

Not really a tip, but an explanation of how our data is maintained.

As you know, splits and dividends cause sudden price changes. For example, a 2 for 1 split immediately increases the number of tradeable shares by a factor of 2 and the price is immediately cut in two. These sudden changes in price would make pattern recognition impossible unless the historical data were adjusted so the historical prices were made consistent with the new volume of tradeable shares. So in this example, we divide all historical prices by 2 and multiply all volumes by two. This gives a smooth time series with discontinuities in price and volume. Dividends create discontinuities also, and so we adjust for these as well.

When we are aware of a split or dividend during the week, we apply an adjustment accordingly. However, to ensure we don't miss anything, we rebuild our historical database for the last 5 years every weekend.


While these adjustments are relatively simple to apply to our historical time series, it is more complicated to apply the adjustments to now 11 years of watchlist data

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17039.5 2.26% 2.79% Up
NASDAQ 4532.1 1.5% 8.51% Up
S&P 500 1992.37 1.91% 7.79% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.95 %
NASDAQ Composite
5.28 %
S&P 500
8.29 %
NASDAQ Composite
8.51 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Aluminum Aluminum Drugs Wholesale Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Home Furnishings & Fixtures
+ 34
Personal Services
+ 67
Home Health Care
+ 160
Foreign Utilities
+ 213
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 RDNT RadNet, Inc. 114
Top Technical RDNT RadNet, Inc. 114
Top Fundamental ATHM Autohome Inc. 44
Top Tech. & Fund. ATHM Autohome Inc. 44
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 RDI Reading International Inc 75
Top Technical FDO Family Dollar Stores, Inc. 27
Top Fundamental NEWM New Media Investment Group Inc. 49
Top Tech. & Fund. NEWM New Media Investment Group Inc. 49
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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