Weekly Newsletter 03/27/15
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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 three major indexes all suffered steep declines this week and the NASDAQ Composite suffered most with two big distribution days on Tuesday and Wednesday. On Thursday, the NASDAQ found support at the 50 day moving average level and went on to have the biggest gains of the three on Friday. The NASDAQ is the only one of the three to be above the 50 day average and the only one that our trend indicator considers on an upward trend.
NASDAQ Composite
 Weekly Breakout Report  

The steep decline kept the number of breakouts to a low 7 with an average gain of negative 0.7% heavily influenced by the steep failure of High Tight Flag pattern (HTF) breakout CBMG. NVEE, the top performer, conformed to the classic cup and handle pattern, exhibiting almost perfect cup and then handle price and volume behavior (see Anatomy of a Cup-with-Handle Chart Pattern)
 
Breakouts for Week Beginning 03/23/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
03/23/15 NVEE CwH N 14.84 15.50 94 16 7.82 8.36
03/26/15 CMC HSB N 15.26 15.28 20 15.5 1.57 1.57
03/27/15 WUBA CwH N 49.10 49.83 80 49.83 1.49 1.49
03/23/15 CBMG HTF N 46.45 47.06 99 40.1 -13.67 1.31
03/27/15 JIVE HSB N 5.12 5.17 9 5.17 0.98 0.98
03/23/15 FLTX CwH N 45.58 46.01 90 43.74 -4.04 0.94
03/27/15 RPTP CwH N 11.88 11.97 80 11.97 0.76 0.76
Weekly Average (7 breakouts) -0.73 2.2
*RS Rank on day before breakout.

  cup and handle pattern for NVEE
 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

Cup Depth of Little Importance to Breakout Day Performance


Following last week's analysis of the significance of handle depth to breakout day performance, I was asked if there was an optimal  cup depth.

The chart below shows a scatter plot of breakout day gain versus cup depth as a % of left cup for all successful breakouts since January 2014. Cup depth is measured from the left cup high to the base low and then expressed as a % of the left cup high .

The red line is a polynomial regression line, or line of best fit, through the observations.

Firstly, notice that there are very few breakouts with cup depths less than 8%, although breakout day gains of up to 8% are possible although rare.

Secondly, most breakouts occur between cup depths of 10% to 40% but there are still many breakouts at even deeper depths. The cut-off at 60% is due to our not listing cups with a depth greater than 60% on our cup and handle watchlist.

Finally, although there are some high gain breakouts for cup depths between 30% and 40%, they are rare and outliers to the general trend.

Cup Depth Study

Conclusion

There is no optimal cup depth for strong breakout day gains from the cup and  handle watchlist, but shallow cup depths (less than 8%) rarely produce breakouts.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17712.7 -2.29% -0.62% Down
NASDAQ 4891.22 -2.69% 3.28% Up
S&P 500 2061.02 -2.23% 0.1% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
-2.23 %
NASDAQ Composite
1.75 %
NASDAQ Composite
8.4 %
NASDAQ Composite
3.28 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Drugs Wholesale Toy & Hobby Stores Toy & Hobby Stores Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Rubber & Plastics
+ 43
Dairy Products
+ 74
Music & Video Stores
+ 157
Grocery Stores
+ 172
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 MWW Monster Worldwide, Inc. 101
Top Technical MWW Monster Worldwide, Inc. 101
Top Fundamental GTN Gray Television, Inc. 68
Top Tech. & Fund. GTN Gray Television, Inc. 68
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 RPTP Raptor Pharmaceutical Corp. 73
Top Technical FLTX Fleetmatics Group PLC 47
Top Fundamental FLTX Fleetmatics Group PLC 47
Top Tech. & Fund. FLTX Fleetmatics Group PLC 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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