Weekly Newsletter 12/19/14
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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  

Wishing all my readers a happy holiday season and successful trading in the New Year.

The NASDAQ Composite crashed through support last Tuesday but the upward trend was restored on Wednesday in response to the FOMC reaffirming that the current target range for the federal funds rate was appropriate and also delaying parts of the Volcker rule until 2017. This ensures that the big financial institutions can continue to run up the equities markets for the foreseeable future and loans for small businesses and housing will remain in short supply. After all, why make risky loans when one can borrow from the Fed at effectively negative interest rates and make 12+% in the stock market. The above average volumes since Wednesday indicates that this reversal has plenty of support. The index closed at 4765 and looks as though it could test resistance at 4810 shortly.

NASDAQ Comp 12/19/14
 Weekly Breakout Report  

The number of breakouts soared to 41 this week after just 10 last week. While average gains were not spectacular, there were just 5 of the 41 that were slightly under water at the end of the week. None of t he 5 were cup and handle breakouts.
 
Breakouts for Week Beginning 12/15/14
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
12/18/14 MGNX CwH N 30.76 33.83 34.53 12.26 12.26
12/18/14 FPRX CwH N 23.25 24.28 25.89 11.35 11.35
12/17/14 GEVA CwH N 91.27 96.04 95.46 4.59 7.1
12/17/14 CENTA SQZ Y 8.62 8.92 8.99 4.29 6.61
12/17/14 CLH HSB N 48.00 49.75 49.06 2.21 6.49
12/15/14 KIRK CwH N 22.53 22.84 23.12 2.62 5.9
12/16/14 PCCC SQZ Y 23.95 23.95 24.58 2.63 4.97
12/15/14 CBAY CwH N 8.25 8.30 8.61 4.36 4.36
12/18/14 SAAS HSB N 8.65 8.81 9.02 4.28 4.28
12/18/14 LNKD SQZ Y 226.28 231.84 234.61 3.68 3.68
12/18/14 TWOU CwH N 18.71 19.10 19.35 3.42 3.42
12/17/14 LBAI SQZ Y 11.54 11.77 11.9 3.12 3.38
12/17/14 TSRE CwH Y 7.87 7.97 8.03 2.03 3.3
12/16/14 WM SQZ Y 49.30 49.39 50.78 3.00 3.16
12/17/14 LIN SQZ Y 25.03 25.79 25 -0.12 3.04
12/18/14 CSV SQZ Y 20.18 20.49 20.78 2.97 2.97
12/17/14 WM SQZ Y 49.49 49.55 50.78 2.61 2.77
12/17/14 RMD CwH N 54.75 54.95 56.24 2.72 2.72
12/17/14 TWM HSB Y 51.61 52.92 52.92 2.54 2.54
12/19/14 IL SQZ Y 11.17 11.42 11.42 2.24 2.24
12/17/14 AEL SQZ Y 28.30 28.5 28.35 0.18 2.16
12/17/14 EXPO SQZ Y 81.31 81.65 81.89 0.71 2.05
12/19/14 MSG DB Y 73.84 75.07 75.07 1.67 1.67
12/17/14 OTTR SQZ Y 30.22 30.48 30.72 1.65 1.65
12/18/14 XLU SQZ Y 46.49 47.2 46.86 0.80 1.53
12/19/14 Q SQZ Y 59.48 60.39 60.39 1.53 1.53
12/18/14 EXPO SQZ Y 81.75 82.98 81.89 0.17 1.5
12/19/14 NRZ HTF N 13.34 13.51 13.51 1.27 1.27
12/16/14 NKX CwH N 14.47 14.50 14.65 1.24 1.24
12/18/14 SVU CwH N 9.40 9.49 9.43 0.32 1.06
12/18/14 FDML HSB Y 15.64 15.80 15.61 -0.19 1.02
12/18/14 FRME SQZ Y 22.59 22.81 22.58 -0.04 0.97
12/19/14 WIBC HSB N 9.85 9.93 9.93 0.81 0.81
12/18/14 PAYX DB N 47.41 47.75 46.3 -2.34 0.72
12/18/14 OUTR CwH N 73.91 74.34 74.22 0.42 0.58
12/17/14 EFSC SQZ Y 19.80 19.89 19.72 -0.40 0.45
12/18/14 DLX SQZ Y 61.21 61.32 61.46 0.41 0.41
12/19/14 NJ CwH N 17.12 17.15 17.15 0.18 0.18
12/18/14 MGAM CwH N 36.41 36.45 36.44 0.08 0.11
12/19/14 PIKE CwH N 11.99 12.00 12 0.08 0.08
12/17/14 HSKA SQZ Y 16.91 16.91 16.74 -1.01 -0
Weekly Average (41 breakouts) 2.06 2.87

 
 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

Focus Due Diligence on High RS  Cup and Handle Stocks


The two strongest breakouts this week were MGNX with an RS of 91 on the day before breakout and FPRX with an RS of 98 on the day before breakout. Both were from a cup and handle pattern.

Over the 12 years this site has been operational, I have consistently found that the most important factor in determining performance after breakout is Relative Strength Rank (RS) and that the most reliable pattern is the cup and handle.

Stocks with ab RS of 90 or above have consistently outperformed 90% of the market over the last 12 months. While this is no guarantee of future performance, the data shows that this performance does tend to continue on the average.

For this reason, I recommend that when doing your due diligence on stocks on our watchlists, you focus firstly on the cup and handle watchlist and look for stocks with an RS rank of 90 or above.

RS Rank Formula

RS Rank is a gauge of a stock's price performance vs. all other stocks in the NYSE, AMEX and NASDAQ. The change in each stock's price for each of the previous four quarters is used to derive a weighted price performance for each stock. This weighted price performance is then used to rank all stocks against each other. Each stock is then given an RS Rank from 99 (highest) to 1 (lowest). This value is updated daily, so is a dynamic indicator of relative performance against all other stocks given the latest closing prices.

Formula for determining RS Rank:

Weighted Price Change = (Price change this quarter * 40%)

+ (Price change 1 qtr ago * 20%)

+ (Price change 2 qtrs ago * 20%)

+ (Price change 3 qtrs ago * 20%)

When less than 4 quarters of data are available, 3 quarters are weighted 50%/30%/20%; 2 quarters are weighted 60%/40%; and one quarter or less is weighted 100% on the available data.


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17804.8 3.03% 7.41% Up
NASDAQ 4765.38 2.4% 14.1% Up
S&P 500 2070.65 3.41% 12.03% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
3.41 %
NASDAQ Composite
4.05 %
NASDAQ Composite
9.1 %
NASDAQ Composite
14.1 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Toy & Hobby Stores Toy & Hobby Stores Toy & Hobby Stores Drugs Wholesale
 Most Improved Industry (by change in technical rank2)
Dairy Products
+ 39
Textile Industrial
+ 62
Home Furnishing Stores
+ 143
Home Health Care
+ 185
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 EVC Entravision Communications Corporation 106
Top Technical EVC Entravision Communications Corporation 106
Top Fundamental HW Headwaters Incorporated 66
Top Tech. & Fund. RAX Rackspace Hosting, Inc 30
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 SVU SuperValu Inc. 86
Top Technical TWOU 2U, Inc. 52
Top Fundamental NJ Nidec Corporation (Nihon Densan Kabushiki Kaisha) 54
Top Tech. & Fund. KIRK Kirkland's, Inc. 42
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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