|Weekly Newsletter 09/20/14|
|Login Trial Guest|
|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.
|Prior editions of this newsletter with our valuable Tips of the Week are available here.|
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.
|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.
|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
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.
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.
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%.
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.
Daily trading volume is shown on our
Technical Analysis charts. This criterion is best determined on
a daily basis.
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.
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.
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|
|Top Breakout Choices||Stocks on our Cup-and-Handle list with best expected gain if they breakout|
|Top Second Chances||Stocks that broke out this week and are still in buyable range|
If you received this newsletter from a friend and you would like to receive it regularly please go to the BreakoutWatch.com site and enter as a Guest. You will then be able to register to receive the newsletter.
Copyright © 2014 NBIcharts, LLC dba BreakoutWatch.com. All rights
BreakoutWatch is not affiliated with Investor's Business Daily or
with Mr. William O'Neil. Our site, research and analysis is
supported entirely by subscription and is free from advertising.