Weekly Newsletter 10/02/15
Login   Trial   Guest
You are receiving this email because you are or were a BreakoutWatch.com subscriber, or have subscribed to our weekly newsletter. This newsletter summarizes the breakout events of the week and provides additional guidance that does not fit into our daily format. It is published each weekend.
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  

Friday's market action met William O'Neil's definition of a "Follow Through Day (FTD)". That is, the market closed higher on the fourth day after a mid-day reversal. Under this definition, the first day of the rally came on Tuesday when a mid-day reversal saw the NASDAQ close above its intra-day low. For CANSLIM adherents, this is a signal that the downward trend has reversed and it is safe to re-enter the markets. Our trend signal remains negative, however, although I would expect it to turn up shortly, if the rally continues in the early part of next week.

In 2011 I did an analysis of FTDs and found that of 18 clearly defined bottoms an FTD occurred for only 10 of them. Consequently, I prefer to wait for my own trend signal, which is more conservative, to turn up .
NASDAQ Composite Chart
 Weekly Breakout Report  

The number of breakouts rose from 33 to 41 this week. Volatility Squeeze breakouts again dominated with 23 breakouts compared to 13 for our cup and handle list. The top breakout again followed a pattern that I have emphasized again and again as a common feature of strong breakouts - that the breakout is preceded by a move up on strong volume.
Volatility Squeeze Breakout for NEWT

Breakouts for Week Beginning 09/28/15
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
10/01/15 NEWT SQZ Y 16.38 18.25 81 18.91 15.45 15.45
10/01/15 TYL CwH N 152.91 164.39 96 168.01 9.88 9.88
10/01/15 EW SQZ Y 142.24 149 88 154.55 8.65 8.65
10/01/15 VRSK SQZ Y 73.92 78.16 86 79.88 8.06 8.06
10/02/15 DTEA HSB N 15.84 16.85 21 16.85 6.38 6.38
10/01/15 JNPR SQZ Y 25.75 26.04 87 27.17 5.51 5.51
09/29/15 CMN CwH N 53.88 54.48 89 56.12 4.16 5.51
09/29/15 IPGP HSB N 74.00 74.55 49 77.3 4.46 4.46
09/29/15 ROCK SQZ Y 17.69 17.85 81 18.35 3.73 4.13
09/29/15 NCI SQZ Y 15.77 15.8 88 16.4 3.99 3.99
09/30/15 MATX SQZ Y 38.08 38.45 87 39.41 3.49 3.49
10/01/15 IBKR SQZ Y 39.48 40.66 94 38.99 -1.24 2.99
10/01/15 CHMT SQZ Y 28.66 29.4 87 29.51 2.97 2.97
09/28/15 RAI SQZ Y 43.03 43.42 95 44.01 2.28 2.95
09/30/15 HDB CwH N 60.83 61.10 90 62.6 2.91 2.91
10/01/15 VRSN CwH N 71.29 71.42 93 73.31 2.83 2.83
10/01/15 NCI SQZ Y 15.95 16.39 88 16.4 2.82 2.82
09/28/15 IRET CwH N 7.68 7.69 81 7.6 -1.04 2.34
10/01/15 WNR SQZ Y 44.15 44.49 82 45.17 2.31 2.31
10/01/15 AZO SQZ Y 724.40 736.35 92 740.78 2.26 2.26
10/01/15 EXPO CwH N 44.96 45.17 85 45.9 2.09 2.09
09/30/15 TLMR SQZ Y 16.36 16.67 86 15.97 -2.38 1.89
09/29/15 IRET CwH N 7.72 7.86 87 7.6 -1.55 1.81
10/01/15 FISV SQZ Y 86.65 87.51 91 88.22 1.81 1.81
10/01/15 LMOS HSB N 12.19 12.33 26 12.38 1.56 1.56
10/02/15 SIX SQZ Y 46.33 46.95 90 46.95 1.34 1.34
10/01/15 CSGS SQZ Y 30.80 31.1 86 31.21 1.33 1.33
10/02/15 CALM CwH N 58.72 59.48 95 59.48 1.29 1.29
10/01/15 ACN SQZ Y 98.29 98.44 86 99.39 1.12 1.12
10/01/15 TGT SQZ Y 78.71 79.51 82 79.53 1.04 1.04
10/02/15 EGBN CwH N 45.65 46.05 93 46.05 0.88 0.88
09/30/15 DMF CwH N 9.40 9.41 83 9.48 0.85 0.85
09/29/15 HTBI SQZ Y 18.54 18.67 93 18.63 0.49 0.81
09/29/15 FR CwH N 20.99 21.11 87 21.14 0.71 0.71
09/29/15 EVN CwH N 12.98 13.00 81 12.8 -1.39 0.69
10/02/15 AZO SQZ Y 736.64 740.78 94 740.78 0.56 0.56
10/01/15 FICO SQZ Y 84.57 84.95 88 84.02 -0.65 0.45
10/02/15 HME SQZ Y 74.91 75.2 90 75.2 0.39 0.39
10/02/15 PML CwH N 12.07 12.10 81 12.1 0.25 0.25
10/02/15 CHMT SQZ Y 29.46 29.51 90 29.51 0.17 0.17
09/30/15 VCIT DB N 85.36 85.42 74 85.35 -0.01 0.09
Weekly Average (41 breakouts) 2.43 2.95
*RS Rank on day before breakout.

 
 New Features this Week Additional Value that we added this week

New Strategies in the Cup and Handle Backtest Tool

New Backtest Strategies

The Cup and Handle Backtest tool (from the Evaluate > Analytical Tools Menu) now has two options to choose from:
  1. Cup and Handle Minimum Drawdown
  • This backtest is based on the cup and handle stock characteristics that were determined to give the best return for the least drawdown during 2015. In other words, this is a low risk strategy
  1. Cup and Handle Maximum Return
  • This backtest is based on the cup and handle stock characteristics that were determined to give the maximum return regardless of drawdown during 2015. In other words, this is a higher risk strategy that offers the best possible return.

These two strategies are further explained below.

The backtest tool allows you to develop your own strategies and/or see how the two basic strategies need to be adjusted for changing market conditions.


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

Suggested Strategy for Optimum and Maximum Breakout Returns

  1. For the optimal return (best profit at least risk) I now suggest the following trading strategy for cup with handle stocks:
  • Each day, create a personal watchlist of stocks that satisfy
    • RS Rank must be at least 90
    • Industry Rank must be in the top 20 percentile (i.e. have a rank less than 43 in our industry ranking scheme
    • Average daily volume >= 100,000.
  • If market trend is positive, buy on alert
  • Sell at next open if volume at end of breakout day is less than 2 times average 50 day volume
  • Sell if stock drops 6% or more from the breakout price.
  • If stock  rises above breakout price after purchase, set a 3% trailing stop by monitoring daily high's and setting a stop loss at 3% of the maximum high after breakout. Adjust daily if necessary.
  • Sell if trailing stop met intraday.

        This strategy would have returned 127% year-to-date.

Optimal  Return
  1. For the greatest return (best profit regardless of risk) I now suggest the following trading strategy for cup with handle stocks:
  • Each day, create a personal watchlist of stocks that satisfy
    • RS Rank must be at least 80 (all stocks on the watchlist have an RS of at least 80)
    • Industry Rank must be in the top 70 percentile (i.e. have a rank less than 150 in our industry ranking scheme
    • Average daily volume >= 100,000.
  • Regardless of market trend, buy on alert
  • Sell at next open if volume at end of breakout day is less than 1.5 times average 50 day volume
  • Sell if stock drops 6% or more from the breakout price.
  • If stock rises above breakout price after purchase, set a 3% trailing stop by monitoring daily high's and setting a stop loss at 3% of the maximum high after breakout. Adjust daily if necessary.
  • Sell if trailing stop met intraday.

        This strategy would have returned176% year-to-date.

Best Retun
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 16472.4 0.97% -7.58% Down
NASDAQ 4707.77 0.45% -0.6% Down
S&P 500 1951.36 1.04% -5.22% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
1.04 %
S&P 500
-5.69 %
NASDAQ Composite
-4.26 %
NASDAQ Composite
-0.6 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Music & Video Stores Tobacco Products - Other Tobacco Products - Other Textile Industrial
 Most Improved Industry (by change in technical rank2)
Cement
+ 94
REIT - Healthcare Facilities
+ 74
Drug Related Products
+ 181
Tobacco Products - Other
+ 204
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 BSQR BSQUARE Corporation 95
Top Technical BSQR BSQUARE Corporation 95
Top Fundamental HTBK Heritage Commerce Corp 75
Top Tech. & Fund. UVE UNIVERSAL INSURANCE HOLDINGS INC 55
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 IRET Investors Real Estate Trust 53
Top Technical CALM Cal-Maine Foods, Inc. 41
Top Fundamental HDB HDFC Bank Limited 40
Top Tech. & Fund. HDB HDFC Bank Limited 40
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.

If you received this newsletter from a friend and you would like to receive it regularly please go to the BreakoutWatch.com site and enter as a Guest. You will then be able to register to receive the newsletter.

Copyright 2015 NBIcharts, LLC dba BreakoutWatch.com. All rights reserved.
" BreakoutWatch," the BreakoutWatch.com "eye" logo, and the slogan "tomorrow's breakouts today" are service marks of NBIcharts LLC. All other marks are the property of their respective owners, and are used for descriptive purposes only.

BreakoutWatch is not affiliated with Investor's Business Daily or with Mr. William O'Neil. Our site, research and analysis is supported entirely by subscription and is free from advertising.



To unsubscribe from further breakoutwatch.com newsletters, please click here.