Weekly Newsletter 04/10/15
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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 US market had a good week and all our trend indicators are now showing an upward trend for the three main indicators. The NASDAQ posted three accumulation days and outperformed the DJI and S&P 500. For the year the NASDAQ has gained 5.5% whereas the S&P 500 has gained only 2.1%.
NASDAQ Composite
 Weekly Breakout Report  

Despite the  strong  gains by the major indexes, volumes were mostly at or below the 50 day average. This limits the number of breakouts as we require a 50% volume increase on breakout day to confirm a breakout, except for High  Tight Flag breakouts. Most breakouts came from a volatility squeeze situation (SQZ). CUDA broke out from a comparatively rare cup and handle pattern with squeeze to gain 11.6%. More on CWH squeeze breakouts in our Top Tip below.

Breakouts for Week Beginning 04/06/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
04/09/15 REPH HTF N 9.40 9.73 98 11.17 18.83 18.83
04/07/15 CUDA CwH Y 40.39 40.63 85 45.08 11.61 11.61
04/08/15 AFOP CwH N 17.82 18.06 83 19.35 8.59 8.59
04/10/15 NRP HSB N 6.82 7.37 3 7.37 8.06 8.06
04/07/15 LULU DB N 65.74 66.41 92 68.86 4.75 6.13
04/06/15 WBMD SQZ Y 45.24 46 71 47.11 4.13 6.08
04/09/15 AFOP SQZ Y 18.26 19.06 87 19.35 5.97 5.97
04/09/15 SWIR SQZ Y 36.12 36.81 90 37.58 4.04 4.04
04/08/15 RMBS SQZ Y 13.20 13.54 70 13.73 4.02 4.02
04/06/15 IMAX SQZ Y 35.45 35.9 87 36.18 2.06 2.48
04/10/15 SQBG CwH N 13.64 13.96 86 13.96 2.35 2.35
04/06/15 HRC SQZ Y 49.63 49.63 81 50.71 2.18 2.18
04/07/15 CHEF SQZ Y 22.37 22.43 75 21.57 -3.58 2.1
04/10/15 SIRO SQZ Y 91.37 92.05 71 92.05 0.74 0.74
04/06/15 LNDC SQZ Y 14.69 14.78 81 14.47 -1.50 0.61
04/10/15 PZE CwH N 7.40 7.44 93 7.44 0.54 0.54
Weekly Average (16 breakouts) 4.55 5.27
*RS Rank on day before breakout.

 
 New Features this Week Additional Value that we added this week

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This Week's Top Tip Tips for getting the most out of our site

Breakouts from a Cup and Handle Pattern with Volatility Squeeze Provide Best Breakout Day Pop.

The CUDA breakout this week is an excellent example of a breakout from a cup and  handle pattern with a volatility squeeze in the handle. A "Volatility Squeeze" occurs when the volatility of a stock falls below its recent levels. A fall in volatility usually means that the stock is in a period of consolidation and trending in a narrow range. When that period of consolidation ends, normal volatility will return resulting in a breakout to the upside or downside. We detect a "squeeze" when the 2 standard deviation Bollinger Band (BB) narrows to within the Keltner Channel (KC).

The  chart for CUDA shows that the stock was in a volatility squeeze as it formed its pivot  and continued into the handle. The stock broke out from both its handle and squeeze situation on Tuesday and went on to gain 11.6% by week's end.

cup and handle pattern with Volatility squeeze

Volatiliy Squeeze breakouts from a cup and  handle pattern are relatively rare. Since we introduced the indicator in November 2013, there have been only 51 out of a total of 798 cup and handle breakouts. An analysis of those 51 breakouts compared to those without a squeeze shows that a squeeze breakout is like a spring uncoiling. The breakout day "pop" is on average twice as high as a normal cup and handle breakout (6% compared to 3.1%). The momentum isn't maintained, however, and when we look at the average high within the next 7 and 30 days we see that the squeeze breakouts under-perform the non-squeeze breakouts.


Breakout Pop
7 Day High
30 day High
Breakouts with Squeeze
5.98 % 5.43 % 9.66 %
Breakouts without Squeeze
3.11 % 6.57 % 11.35 %

Conclusion

For the day-trader, volatility squeeze breakouts from a cup and handle pattern can give a substantial profit on breakout day.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 18057.7 1.66% 1.32% Up
NASDAQ 4995.98 2.23% 5.49% Up
S&P 500 2102.06 1.70% 2.1% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
1.6 %
NASDAQ Composite
6.21 %
NASDAQ Composite
16.83 %
NASDAQ Composite
5.49 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Drugs Wholesale Drugs Wholesale Toy & Hobby Stores Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Auto Dealerships
+ 53
Home Improvement Stores
+ 77
Music & Video Stores
+ 175
Dairy Products
+ 206
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. 67
Top Tech. & Fund. GTN Gray Television, Inc. 67
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 PZE Petrobras Argentina S.A. 95
Top Technical PZE Petrobras Argentina S.A. 95
Top Fundamental PZE Petrobras Argentina S.A. 95
Top Tech. & Fund. PZE Petrobras Argentina S.A. 95
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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