Breakoutwatch Weekly Summary 09/03/16
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| New Features this Week
| Top Cup and Handle Chart Pattern Stocks
Major Indexes Performance
| Best Performing Index
Best Performing Industry
Most Improved Industry
|DJI Trend Indicator Gives Downturn
Our trend indicator for the DJI turned down on Thursday. A weakness in any major indicator can be a warning sign that others may follow, although for now, the trend indicator for both the S&P 500 and NASDAQ Composite remain at 'up'. We know that most breakouts come from the NASDAQ so we follow that index more closely than the others. The NASDAQ chart is showing that a potential head and shoulders top pattern (HST) is forming, with a possible right shoulder being established in Friday's trading.
This is not yet a sign for alarm, as the head and shoulders pattern would need to be completed before a distinctive bearish pattern is confirmed. This would occur if the price crosses the dashed line shown in the chart below. That is, a fall to a closing price below 5225. This is worth watching in the coming days. If the HST pattern is completed, then opening new long positions should be discouraged.
You can learn how we determine a Head and Shoulders Top pattern here.
| No new features this week.
Should any of your holdings complete a head and shoulders top pattern, our strategy suggestions are:
We published an analysis of Head and Shoulders Top breakdowns in our newsletter of 7/29/06. We found that a breakdown occurred in 96.38% of cases. This indicates that the head and shoulders pattern is a very powerful predictor of a price decline to come. This is true whether the slope of the neckline is upwards, flat or downwards. Of these, the decline after breakdown exceeded 5% in 74.5% of breakdowns.
Upward sloping necklines are much more common than downward sloping necklines and have a slightly higher potential return by about 1%.
As with the 50 DMA breakdown watchlist, our suggestions are based on my analysis of the results quoted, a review of the literature and the experiences of a short sale hedge fund manager
Because of the high probability that a breakdown is about to occur, you may wish to open a short position immediately an H&S is identified before waiting for the breakdown. The position can then be added to when the breakdown occurs.Immediately after the breakdown, set a stop loss at the breakdown price to protect yourself against the 17.6% of breakdowns that recover the next day.
Otherwise, a reasonable target profit for the trade is 70% of the target price.
|Brkout Date||Symbol||Base||Squeeze||BrkoutOut Price||Brkout Day Close||RS Rank*||Last Close||Current % off BOP||Gain at Intraday High|
|*RS Rank on day before breakout.|
|SKY||12.29||45,186||Skyline Corporation||Manufactured Housing||99||11.99|
|SMMF||20.47||49,941||Summit Financial Group - Inc.||Regional - Mid-Atlantic Banks||94||19.78|
|ENBL||14.93||364,054||Enable Midstream Partners - LP||Oil & Gas Pipelines||93||14.25|
|SMLP||25.02||214,120||Summit Midstream Partners - LP||Oil & Gas Pipelines||93||24.91|
|DAKT||9.99||620,024||Daktronics - Inc.||Computer Based Systems||92||9.74|
|CEQP||22.14||388,228||Crestwood Equity Partners LP||Oil & Gas Pipelines||92||20.95|
|OFG||11.25||564,990||OFG Bancorp||Money Center Banks||92||10.90|
|ARLP||21.20||505,524||Alliance Resource Partners - L.P.||Industrial Metals & Minerals||92||20.77|
|These stocks meet our suggested screening factors
for our Cup and Handle Chart Pattern watchlist.
See Revised Rules for Trading Cup and Handle Breakouts
|Index||Value||Change Week||Change YTD||Trend1|
1The Market Trend is derived from our proprietary market model. The market model is described on the sitehere.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.
|1 Week||13 Weeks||26 Weeks||Year-to-Date|
|1 Week||3 Weeks||13 Weeks||26 Weeks|
|Telecom Services - Foreign
|Charts of each industry rank and performance over 12 months are available on the site|
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