Weekly Newsletter 09/20/14
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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 Composite fell through support on Monday but recovered on Wednesday following the Fed Reserve announcement that promised to keep interest rates unchanged and kept the term "considerable time" when describing how long will elapse between the end of its QE program and the Fed's first rate hike. The index is now heading toward a test of resistance at the post 2000 crash high of 4610. For the week, the NASDAQ lagged the Dow and S&P 500, both of which made new highs.

NASDAQ COmposite
 Weekly Breakout Report  

Despite the pull back on Monday and Tuesday, the number of breakouts crept up from 26 to 28 this week, although overall gains were slightly down as would be expected from the modest gains in the NASDAQ overall.

Breakouts for Week Beginning 09/15/14
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
09/17/14 EPIQ SQZ Y 15.55 17.55 17.29 11.19 12.86
09/17/14 APOG CwH N 37.00 39.49 40.65 9.86 12.62
09/17/14 EEP CwH N 37.03 37.93 39.84 7.59 7.59
09/16/14 TTPH CwH N 16.96 17.03 17.73 4.54 5.96
09/17/14 KNX CwH N 26.10 26.54 27.06 3.68 4.02
09/16/14 LYV CwH N 23.62 24.40 24.48 3.64 3.64
09/18/14 NXTM SQZ Y 13.57 13.97 13.4 -1.25 2.95
09/17/14 SSYS CwH N 125.63 128.65 126.06 0.34 2.91
09/17/14 DFS CwH N 63.76 64.66 65.3 2.42 2.87
09/19/14 DTSI CwH N 24.37 25.07 25.07 2.87 2.87
09/15/14 MO CwH N 43.86 44.27 44.99 2.58 2.58
09/17/14 NSC CwH N 109.55 111.77 112 2.24 2.37
09/18/14 MMP SQZ Y 84.43 85.55 86.19 2.08 2.08
09/15/14 SRI CwH N 12.76 12.90 12.53 -1.80 1.49
09/19/14 CMRE SQZ Y 23.45 23.79 23.79 1.45 1.45
09/17/14 CSIQ CwH N 39.74 40.29 39.19 -1.38 1.38
09/16/14 MYGN SQZ Y 37.70 38.01 37.51 -0.50 1.11
09/19/14 FRGI CwH N 51.01 51.49 51.49 0.94 0.94
09/17/14 ABT SQZ Y 43.30 43.38 43.59 0.67 0.9
09/19/14 ENB CwH N 51.13 51.52 51.52 0.76 0.76
09/17/14 FWRD SQZ Y 47.93 47.96 46.97 -2.00 0.73
09/17/14 HPJ CwH N 7.37 7.42 6.74 -8.55 0.68
09/18/14 FWRD SQZ Y 48.06 48.28 46.97 -2.27 0.46
09/16/14 HRC CwH N 44.24 44.39 43.73 -1.15 0.34
09/19/14 EFII SQZ Y 45.76 45.88 45.88 0.26 0.26
09/18/14 SNV CwH N 24.90 24.95 24.89 -0.04 0.2
09/19/14 PAH CwH N 27.52 27.57 27.57 0.18 0.18
09/19/14 DTN SQZ Y 74.55 74.62 74.62 0.09 0.09
Weekly Average (28 breakouts) 1.37 2.72
 
 New Features this Week Additional Value that we added this week

No new features this week.
This Week's Top Tip Tips for getting the most out of our site

Breakoutwatch as a Tool for the CAN SLIM Investor

It is no secret that breakoutwatch was initially conceived to fill a gap in the offerings of Investors Business Daily. That journal frequently shows how cup and handle breakouts can make strong gains, but they always do so with hindsight. Our goal was to provide the individual investor with advance warning of stocks that were in the cup and handle pattern. We also aimed to quantify, as much as possible, the 7 CAN SLIM rules. This was achieved with what we call our CANTATA Evaluator, standing for Strong Current earnings, sustained Annual growth, New highs, Technical Analysis and Timing Assistance. CANTATA adds to CAN SLIM by adding the dimension of timing assistance - which stocks are in chart patterns like the cup and handle and providing alerts as breakouts take off.

This article aims to show how we evaluate a stack according to CAN SLIM rules. If you are a CAN SLIM investor, it will assist you to recognize good CAN SLIM candidates.I will use AAPL as of 9/19/2014 as an example.

The following definitions of the CAN SLIM mnemonic are taken from Wikipedia.

  • C stands for Current earnings. Per share, current earnings should be up to 25%. Additionally, if earnings are accelerating in recent quarters, this is a positive prognostic sign.

We assess both current earnings and their growth acceleration over the last 4 quarters for which there is published data. We assign a score according to these criteria.

Quarter over Quarter (QoQ) Earnings Growth Rates
If the QoQ earnings per share (EPS) growth rates in the latest  two quarters are greater than or equal to 18%, 1 point. If EPS growth rates in the latest two quarters are negative, 0 points. Points are prorated for growth rates between 0 and 18%. Slightly more weight is placed on the most recent quarter than on the previous quarter in order to derive a combined score for both quarters.
Positive Quarterly Earnings
If the earnings per share (EPS) in the latest two quarters is positive, 1 point. If the EPS in the latest two quarters is negative, 0 points. Slightly more weight is placed on the most recent quarter than on the previous quarter in order to derive a combined score for both quarters.
Quarterly Earnings Growth Rate Acceleration
QoQ EPS growth rates over the last four quarters are used to determine if the QoQ EPS growth rate in one quarter is greater than the QoQ EPS growth rate in the previous quarter. If the growth rate in the recent quarter is positive and greater than the previous quarter, 1 point. If the growth rate in the recent quarter is greater or equal to 25% but less than the previous quarter, 0.5 points. (This allows for deceleration down to a still very high level of growth.)  If the growth rate in the recent quarter is less than 25% and less than the previous quarter, 0 points. Recent quarters are weighted slightly more than older quarters in order to derive a combined score for all four quarters.

Quarterly Earnings

  • A stands for Annual earnings, which should be up 25% or more in each of the last three years. Annual returns on equity should be 17% or more
Year over Year (YoY) Earnings Growth Rates
If the YoY EPS growth rates in the latest four completed fiscal years are greater than or equal to 25%, 1 point. If the YoY EPS growth rates are negative, 0 points. Points are prorated for growth rates between 0 and 25%. Recent fiscal years are weighted slightly more than older fiscal years in order to derive a combined score for all four fiscal years.

Y on Y growth
Return on Equity (ROE)
If the ROE for the trailing twelve months (TTM) is greater than or equal to 17%, 1 point. If  the ROE is negative, 0 points. Points are prorated for ROE values between 0 and 17%.

Return on Equity
  • N stands for New product or service, which refers to the idea that a company should have a new basic idea that fuels the earnings growth seen in the first two parts of the mnemonic.

As there is not an easy way to automate this criterion, we leave it to the due diligence of the reader to evaluate after first considering if the quantitative criteria are satisfied.

  • S stands for Supply and demand. An index of a stock's demand can be seen by the trading volume of the stock, particularly during price increases.

Daily trading volume is shown on our Technical Analysis charts. This criterion is best determined on a daily basis.

  • L stands for Leader or laggard? O'Neil suggests buying "the leading stock in a leading industry".
Relative Strength Rank (RSRank)
Relative Strength Rank compares the 1 year price performance against all other stocks 0n a scale of 1 to99.  If the RSRank equals 99, 1 point. If the RSRank equals 1, 0 points. Points are prorated for RSRank values between 1 and 99.

RS Rank
  • I stands for Institutional sponsorship, which refers to the ownership of the stock by mutual funds, particularly in recent quarters.
Institutional Ownership
Points are equally weighted between two components of institutional ownership as reported in the most recent available quarter. First, if the number of institutional owners is greater than or equal to 5, 1 point. If the number of institutional owners is less than 1, 0 points. Points are prorated for the number of institutional owners between 1 and 5. Second, if the number of net shares purchased by institutional owners is zero or positive, 1 point. If the number of net shares purchased by institutional owners is negative, 0 points.

Institutional Ownership

  • M stands for Market indexes, particularly the Dow Jones, S&P 500, and NASDAQ. During the time of investment, O'Neil prefers investing during times of definite uptrends of these three indices, as three out of four stocks tend to follow the general market pattern.

    Our market trend analysis for each major index is published each day on our Market Analysis page.

    CAN SLIM (CANSLIM) is a registered trademark of Data Analysis, Inc.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17279.7 1.72% 4.24% Up
NASDAQ 4579.79 0.27% 9.65% Up
S&P 500 2010.4 1.25% 8.77% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
1.72 %
NASDAQ Composite
2.42 %
S&P 500
7.71 %
NASDAQ Composite
9.65 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Aluminum Aluminum Aluminum Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Beverages - Wineries & Distillers
+ 46
Music & Video Stores
+ 115
Home Health Care
+ 172
Aluminum
+ 198
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 HPJ Highpower International Inc 111
Top Technical HPJ Highpower International Inc 111
Top Fundamental MEOH Methanex Corporation 29
Top Tech. & Fund. MEOH Methanex Corporation 29
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 TTPH Tetraphase Pharmaceuticals, Inc. 68
Top Technical TTPH Tetraphase Pharmaceuticals, Inc. 68
Top Fundamental FRGI Fiesta Restaurant Group, Inc. 41
Top Tech. & Fund. CSIQ Canadian Solar Inc. 47
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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