Weekly Newsletter 07/31/15
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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  

Stocks rallied this week after shrugging off an 8.5% plunge in China's Shanghai Composite. The markets gained further momentum on Wednesday as the FOMC declined to raise interest rates yet again. With no meeting now until mid-September, I see no reason that the pattern of rising stock  prices constrained by the upper and lower trend lines shown on the chart should not continue, barring an unforeseeable external shock. That gives a target for the NASDAQ over the next week or so of 5270 or thereabouts.
NASDAQ Composite Chart
 Weekly Breakout Report  

The number of breakouts pulled back from 37 last week to 30 this week. Of the 30, only 3 were under water at Friday's close and the average weekly gain was a healthy 3%. Cup and Handle stocks dominated the breakouts with 20 compared to 10 from a  Volatility Squeeze. CwH breakouts gave a weekly gain of 4.2%.

Breakouts for Week Beginning 07/27/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
07/30/15 WWE CwH N 17.61 19.36 91 19.57 11.13 11.3
07/28/15 MSTR CwH N 187.39 202.01 80 203.735 8.72 9.3
07/30/15 HPY CwH N 57.10 57.26 80 62.26 9.04 9.23
07/30/15 BLDR CwH N 13.95 14.75 98 15.065 7.99 8.03
07/29/15 WOOF CwH N 57.07 60.10 72 61.55 7.85 8.01
07/29/15 VNTV CwH N 40.99 42.77 71 44.02 7.39 7.45
07/30/15 MWW CwH N 6.60 6.89 87 7.045 6.74 6.82
07/29/15 PGTI SQZ Y 15.16 15.59 91 16.05 5.87 6
07/27/15 AGN CwH N 322.44 326.98 91 331.64 2.85 5.29
07/30/15 EXLS CwH N 37.23 37.52 87 38.71 3.98 4.14
07/28/15 JJSF CwH Y 114.16 115.90 81 118.34 3.66 3.73
07/28/15 FGL CwH Y 25.20 25.73 83 26.03 3.29 3.29
07/27/15 STZ SQZ Y 116.45 117.34 80 120.05 3.09 3.19
07/29/15 NOC CwH N 170.35 173.44 76 173.11 1.62 2.97
07/31/15 GMK SQZ Y 51.02 52.41 80 52.41 2.72 2.84
07/31/15 MOH CwH N 73.43 75.43 93 75.43 2.72 2.81
07/29/15 BJRI SQZ Y 50.30 51.08 94 51.59 2.56 2.58
07/31/15 AMGN CwH N 172.74 176.83 82 176.83 2.37 2.46
07/30/15 HFC CwH N 47.22 48.15 83 48.26 2.20 2.29
07/30/15 RGR CwH N 58.88 60.15 84 60.085 2.05 2.17
07/29/15 EFX SQZ Y 100.19 102.21 89 102.11 1.92 2.02
07/29/15 PLT SQZ Y 57.19 57.59 75 58.05 1.50 1.63
07/31/15 WWWW CwH N 24.57 24.86 87 24.86 1.18 1.34
07/29/15 GNE SQZ Y 10.77 10.9 91 10.34 -3.99 1.21
07/29/15 MKC SQZ Y 81.14 81.4 78 81.96 1.01 1.08
07/29/15 OMAB CwH N 44.48 44.91 81 44.4 -0.18 0.97
07/30/15 HTLF SQZ Y 37.55 37.75 93 37.69 0.37 0.53
07/29/15 HCSG CwH N 35.10 35.23 84 34.91 -0.54 0.37
07/27/15 FFKT SQZ Y 28.37 28.41 90 25.5 -10.12 0.14
07/31/15 QLTY CwH N 15.92 15.92 96 15.92 0.00 0
Weekly Average (30 breakouts) 2.97 3.77
*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

Mea Culpa: Do Not Day Trade Based on Close Up Prediction

Last week I introduced a new Cup and Handle watchlist filter to select stocks that are predicted to close up at the  next session.  This filter is based on a model that backtested to predict stocks that will close up with 68.5% accuracy. I have now identified a flaw in the model which reduces its reliability.

The aim of the model was to identify stocks that could be bought  at the next day's open and be rewarded with a gain on the day 68.5% of the time. Theoretically, over time this would return a substantial gain because there would be two winners for every loser.

The flaw in the model was in failing to account for the situation where the stock  gaps up at the next day's open and then closes below the open price, even  though it may close higher than the previous day's close as correctly predicted.

Consequently, I cannot recommend trading based on the predictions of this filter at this time.
 
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 17689.9 0.69% -0.75% Down
NASDAQ 5128.28 0.78% 8.28% Up
S&P 500 2103.84 1.16% 2.18% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
1.16 %
NASDAQ Composite
2.46 %
NASDAQ Composite
10.64 %
NASDAQ Composite
8.28 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Tobacco Products - Other Tobacco Products - Other Textile Industrial Drugs Wholesale
 Most Improved Industry (by change in technical rank2)
Auto Parts Wholesale
+ 116
Auto Parts Wholesale
+ 112
Tobacco Products - Other
+ 167
Tobacco Products - Other
+ 186
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 PMFG PMFG, Inc. 108
Top Technical PMFG PMFG, Inc. 108
Top Fundamental ANET Arista Networks, Inc. 35
Top Tech. & Fund. ANET Arista Networks, Inc. 35
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 QLTY Quality Distribution, Inc. 65
Top Technical FGL Fidelity and Guaranty Life 33
Top Fundamental MOH Molina Healthcare Inc 38
Top Tech. & Fund. MOH Molina Healthcare Inc 38
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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