Weekly Newsletter 04/24/15
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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  

I follow the NASDAQ Composite index more closely than the other major indexes because, as I have shown here, it is from that exchange that the most profitable breakouts occur. This week, the NASDAQ closed at a 15 year high. Barry Ritholz explains here why it took the NASDAQ so long to close at a new high compared to just 6 years for the DJI and S&P 500 after the 2007 crash. The WSJ has an interactive display of the NASDAQ's wild ride since 1994 here.

Friday's surge came following strong results from Google, Amazon and Microsoft. Apple reports after the close on Monday.

NASDAQ Composite Chart
 Weekly Breakout Report  

Last week I drew attention to the quick profits that can be made when a breakout occurs from a cup and handle pattern with a volatility  squeeze in the handle. We have another example this week with CIGA which gained 20% following breakout on Tuesday.

CISG cup and handle chart
 
Breakouts for Week Beginning 04/20/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
04/21/15 CISG CwH Y 9.15 9.99 91 11 20.22 20.22
04/22/15 CAMP HSB N 18.87 20.87 23 20.34 7.79 15.26
04/21/15 TTS CwH N 13.02 14.85 90 14.01 7.60 14.06
04/23/15 PMC SQZ Y 28.90 30.79 74 30.5 5.54 6.54
04/24/15 MMSI DB N 19.33 20.58 92 20.58 6.47 6.47
04/20/15 HCKT CwH N 9.36 9.81 92 9.74 4.06 6.41
04/23/15 EXPO CwH N 89.98 95.29 80 95.36 5.98 5.98
04/23/15 RTEC DB N 11.76 12.45 80 12.38 5.27 5.87
04/20/15 RDN CwH N 17.44 17.94 80 18.37 5.33 5.79
04/23/15 IDXX DB N 156.11 159.40 76 164.05 5.09 5.09
04/20/15 OXM CwH N 77.33 77.93 86 79.94 3.38 3.58
04/24/15 DSW SQZ Y 37.87 39.14 79 39.14 3.35 3.35
04/23/15 CVTI SQZ Y 34.45 35.59 98 33.15 -3.77 3.31
04/23/15 AMAG HTF N 58.50 60.35 98 60.01 2.58 3.16
04/21/15 ATHM CwH N 51.89 52.01 92 53.31 2.74 2.74
04/23/15 OSTK CwH N 25.16 25.18 90 25.79 2.50 2.5
04/24/15 HBM SQZ Y 8.99 9.21 71 9.21 2.45 2.45
04/21/15 CUDA CwH N 45.08 45.79 93 46.12 2.31 2.31
04/23/15 AFOP CwH N 19.35 19.76 88 19.33 -0.10 2.12
04/24/15 TSM SQZ Y 24.40 24.91 72 24.91 2.09 2.09
04/21/15 XRM CwH N 18.35 18.39 88 18.62 1.47 2.07
04/21/15 DBJP CwH N 42.73 43.19 80 43.34 1.43 1.99
04/24/15 JD HTF N 34.11 34.72 91 34.72 1.79 1.79
04/22/15 ABT SQZ Y 47.62 48.35 73 48.32 1.47 1.76
04/23/15 KCG SQZ Y 12.87 13 77 13.09 1.71 1.71
04/22/15 AVOL DB N 21.89 22.02 78 22.26 1.69 1.69
04/23/15 IVC CwH N 20.36 20.54 89 20.68 1.57 1.57
04/24/15 CYOU CwH N 28.87 29.32 85 29.32 1.56 1.56
04/23/15 TAN CwH N 49.19 49.95 91 48.51 -1.38 1.55
04/22/15 MA DB N 89.82 91.20 75 90.72 1.00 1.54
04/22/15 SYK DB N 96.01 96.45 74 96.9 0.93 1.22
04/23/15 TTMI CwH N 9.21 9.31 89 9.22 0.11 1.09
04/24/15 FNF CwH Y 37.93 38.25 82 38.25 0.84 0.84
04/21/15 ZNH HTF N 52.58 53.00 99 50.72 -3.54 0.8
04/22/15 AN CwH N 65.46 65.83 81 64.8 -1.01 0.57
04/20/15 AEL CwH N 29.54 29.60 81 28.97 -1.93 0.44
04/23/15 JNS CwH N 18.45 18.51 86 18.51 0.33 0.33
04/23/15 COLB SQZ Y 30.08 30.15 76 29.84 -0.80 0.23
04/21/15 ELY SQZ Y 10.04 10.06 86 9.89 -1.49 0.2
04/24/15 RLH SQZ Y 6.99 7 78 7 0.14 0.14
04/20/15 MTRN CwH N 40.48 40.50 83 40.26 -0.54 0.05
04/22/15 STM CwH N 9.94 9.94 82 9.44 -5.03 -0
Weekly Average (42 breakouts) 2.17 3.39
*RS Rank on day before breakout.
 
 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

Revised Recommendations for Trading Cup and Handle Patterns

I have run our  cup with handle backtest for 2015 and now have the following minor modification to my previous recommendations. The minor modification are in bold and highlighted below.

For the optimal return (best profit at least risk) from breakouts from our cup with handle watchlist, I now recommend the following trading strategy:
  1. Each day, create a personal watchlist of stocks that satisfy
    • RS Rank must be at least 90
    • Industry Rank must be in the top 60 percentile (i.e. have a rank less than 135 in our industry ranking scheme)
    • Average daily volume >= 100,000.
  2. Buy on alert
  3. Sell at next open if volume at end of breakout day is less than 1.75 times average 50 day volume
  4. Sell if stock drops 6% or more from the breakout price.
  5. After purchase set a 4% trailing stop by monitoring daily high's and setting a stop loss at 4% of the maximum high after breakout. Adjust daily if necessary.
  6. Sell if trailing stop met intraday. (use a sell stop order).

Using our 1 position strategy, these recommendations would have returned over 90% since January 1 this year. (See image below for our backtest  results. Click for original size)

strategy test may 2015
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow
-100% -100% Up
NASDAQ 17826.3 261.46% 276.4% Up
S&P 500 4931.81 136.97% 139.54% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
261.46 %
NASDAQ Composite
274.67 %
NASDAQ Composite
297.58 %
NASDAQ Composite
276.4 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Sporting Goods Drugs Wholesale Toy & Hobby Stores Toy & Hobby Stores
 Most Improved Industry (by change in technical rank2)
Auto Dealerships
+ 86
Auto Dealerships
+ 118
Office Supplies
+ 162
Dairy Products
+ 196
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. 107
Top Technical MWW Monster Worldwide, Inc. 107
Top Fundamental GTN Gray Television, Inc. 66
Top Tech. & Fund. GTN Gray Television, Inc. 66
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 HCKT The Hackett Group, Inc. 86
Top Technical ATHM Autohome Inc. 42
Top Fundamental ATHM Autohome Inc. 42
Top Tech. & Fund. ATHM Autohome 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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