Weekly Newsletter 02/06/15
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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 set higher highs each day this week on above average volume. The strong jobs report on Friday allowed the  index to test resistance at  4774 but waned in the afternoon to close for a loss as enthusiasm was tempered by the prospect that a stronger economy could bring on a rise in Fed rates sooner than previously expected, and a downgrade of Greece's debt by S&P to B-.

Despite the stronger showing, our trend indicator for each of the major indexes remains negative.
NASDAQ Comp.
 Weekly Breakout Report  

The number of breakouts slipped back to 22 this week from 30 last week, while the average gain rose from 1.63% to  2.2%.
 
Breakouts for Week Beginning 02/02/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close Last Close Current % off BOP Gain at Intraday High
02/02/15 FTR CwH N 6.91 7.15 7.93 14.76 17.22
02/03/15 AEIS CwH N 25.07 25.42 27.23 8.62 12.41
02/05/15 BLL DB N 67.41 72.03 70.61 4.75 9.03
02/05/15 ATW HSB N 30.07 30.89 32.18 7.02 8.75
02/03/15 CEVA CwH Y 18.73 19.59 19.23 2.67 8.57
02/05/15 KIRK CwH Y 24.73 25.71 25.66 3.76 8.33
02/06/15 AIRM HSB N 44.86 47.69 47.69 6.31 7.4
02/03/15 DSPG CwH N 11.02 11.20 11.31 2.63 5.81
02/04/15 SIMO CwH N 28.57 28.75 29.59 3.57 5.01
02/02/15 AMZN DB N 360.84 364.47 374.28 3.72 4.98
02/03/15 IMOS CwH Y 24.18 24.98 24.12 -0.25 4.63
02/03/15 HTLF CwH N 28.84 28.90 29.53 2.39 3.43
02/03/15 SHPG CwH N 222.17 227.41 223.68 0.68 2.99
02/05/15 MRTX CwH N 22.65 22.96 22.65 0.00 2.65
02/05/15 DRNA HTF N 21.71 21.97 21.31 -1.84 2.49
02/06/15 MS DB N 35.53 35.79 35.79 0.73 2.2
02/03/15 CUB DB N 52.99 53.34 53.32 0.62 2.13
02/03/15 MDU HSB N 22.91 23.37 21.94 -4.23 2.01
02/04/15 SPIL CwH N 8.82 8.92 8.63 -2.15 1.59
02/02/15 SCIF CwH N 48.84 49.51 46.7 -4.38 1.37
02/03/15 COP HSB N 67.72 67.74 67.49 -0.34 0.97
02/03/15 ABT DB N 45.79 45.83 45.5 -0.63 0.92
Weekly Average (22 breakouts) 2.2 5.22

 
 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

Our Modified Version of CAN SLIM® will Lead you to more Profitable Breakouts with Less Risk

A trial subscriber who is a CAN SLIM devotee sought my help this week in understanding how the site could help him find CAN SLIM® style stocks. After I walked him through what we have to offer, he felt that the site offered him all the information he would need to apply the system successfully.

While we do aim to fill a void left by Investors Business Daily by anticipating breakouts rather than reporting on them after the fact, there are several areas in which our experience after 12 years of operating this site and analyzing what works and what doesn't, leads us to recommend some modifications to the CAN SLIM® methodology.

1. Only two of the CAN SLIM® recommendations for minimum levels for the growth in earnings, sales, institutional ownership, return on investment, and so on (see our CE Scoring for a complete list of these metrics and minimum criteria) have a measurable effect on performance after breakout. These are:
  • the last two quarters' earnings must be positive and
  • earnings growth rates must have increased in each of the last four quarters. (see here).
2. Minimum volume on breakout should be at least 225% of average daily volume NOT at least 150%. While stocks with lesser volumes can do well, the chance of getting a strong gain after breakout, at least 25% gain above breakout price, is considerably improved at breakout day volumes of 225% ADV or more. (see here).

3. Lower priced stocks give better returns than higher priced ones. By using the CAN SLIM® recommendation of a $12 minimum we found you were losing 60% of your potential gains compared to the minimum price of $6 we require for inclusion on our watchlists.

4. Relative Strength Rank of at least 80 is too low. We found a RS Rank of at least 92 was necessary to give average returns after breakout of at least 25%. (see here).

5. Industry Rank has no correlation with subsequent performance after breakout and can be safely ignored when selecting a breakout stock for purchase. High performing breakouts can come from any industry.

6. While stocks that ranked higher in their industry are more likely to breakout, their rank within industry was not correlated with a better performance after breakout.

Summary

The criteria ideal for a strong breakout are:
  • Minimum RS Rank of 92
  • Breakout day volume of 225% of Average Daily Volume (ADV)
  • ADV must be at least 100,000
  • Last two quarters earnings must be positive
  • Last four quarters must have shown accelerating earnings
After purchase:
  • set a stop loss at 6% of the breakout price
  • move the stop up after the stock has gained at least 5%
Further reading 


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17824.3 3.84% 0.01% Down
NASDAQ 4744.4 2.36% 0.18% Down
S&P 500 2055.47 3.03% -0.17% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
3.84 %
NASDAQ Composite
2.41 %
NASDAQ Composite
8.55 %
NASDAQ Composite
0.18 %
 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 Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Photographic Equipment & Supplies
+ 70
Auto Parts Stores
+ 71
Semiconductor - Memory Chips
+ 177
Photographic Equipment & Supplies
+ 187
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 GFIG GFI Group Inc. 100
Top Technical GFIG GFI Group Inc. 100
Top Fundamental CBPO China Biologic Products, Inc. 36
Top Tech. & Fund. CBPO China Biologic Products, Inc. 36
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 SPIL Siliconware Precision Industries Company, Ltd. 81
Top Technical SIMO Silicon Motion Technology Corporation 46
Top Fundamental IMOS ChipMOS TECHNOLOGIES (Bermuda) LTD. 41
Top Tech. & Fund. KIRK Kirkland's, Inc. 44
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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