Breakoutwatch Weekly Summary 08/19/17

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New Features this Week
Strategy Suggestions
Breakouts Summary
Breakouts Detail
Top Cup and Handle Chart Pattern Stocks
Breakouts Index
Major Indexes Performance
Best Performing Index
Best Performing Industry
Most Improved Industry

Weekly Commentary
Volatility Squeeze Pattern Outperforms Cup and Handle

Our market trend indicators remain positive after the NASDAQ composite found support on Friday at the previous Friday's low. Despite the 0.6% loss for the week, the NASDAQ recorded only one distribution day which occurred on Thursday as rumors spread that economic adviser Gary Cohn planned to resign. The market opened lower still on Friday but news of the firing of Steve Bannon lifted spirits for a while but a selloff at the close left the index with 0.1% loss on the day.


Volumes were well below average until Thursday which hurt the number of breakouts as did Thursday's loss. The result was we recorded only 5 confirmed breakouts for the week. Unusually, cup and handle pattern stocks did not perform well with the best performer of the week coming from the Volatility Squeeze pattern. See below for a recap of how that works.

New Features this Week

No new features this week
Strategy Suggestions

Our latest strategy suggestions are here.

The Volatility Squeeze pattern is the second most prolific performer of the patterns we study. 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. If we can recognize a volatility squeeze situation, then we have the opportunity to place a long or short position order and profit from the breakout. We detect a "squeeze" when the 2 standard deviation Bollinger Band (BB) narrows to within the Keltner Channel (KC). Bollinger Bands are very susceptible to volatility changes while Keltner Channels are a smoother, trend following, indicator. Consequently, the narrowing of the BB to within the KC gives us a convenient means of algorithmicly recognizing a drop in volatility. However, we only publish stocks in a Volatility Squeeze when the stock is trending up with positive and increasing momentum.

This week's breakout of allograft producer MDXG provides an opportunity to review a Volatility Squeeze (SQZ) breakout in action. The chart below shows the relevant features of the SQZ. Note also that volume increased significantly and momentum became positive on the day before the breakout. We emphasize frequently that a significant volume rise increases the probability of breakout.

MDXG Breakout from SQZ

SQZ Chart ParametersThe chart above is produced using the chart settings shown on the right. Our Volatility Squeeze watchlist produces charts like  this for all stocks on that watchlist.
Breakouts Summary by Watchlist for Week Beginning 08/14/17
List Breakouts Avg. Gain
CWH 3 -0.26
SQZ 2 2.3
Breakouts Detail for Week Beginning 08/14/17
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
2017-08-15 MDXG SQZ y 15.79 17 96 16.52 4.62% 9.94%
2017-08-14 BEAT CWH n 35.40 37 96 35.675 0.78% 4.94%
2017-08-15 CDI CWH n 8.25 8 85 8.275 0.3% 0.91%
2017-08-15 PRAH SQZ y 74.78 76 90 74.76 -0.03% 2.57%
2017-08-16 HBM CWH n 8.05 8 89 7.9 -1.86% 1.61%
*RS Rank on day before breakout.

Top Rated Cup and Handle Stocks as of Friday August 18, 2017
Symbol BO
Company Industry RS
LHCG 65.55 251,120 LHC Group Home Health Care 94 64.31
NAV 31.72 1,018,276 Navistar International Corporation Trucks & Other Vehicles 94 30.35
HOFT 44.40 111,488 Hooker Furniture Corporation Home Furnishings & Fixtures 93 41.15
COR 111.77 481,930 CoreSite Realty Corporation REIT - Office 93 110.14
MNTX 8.78 97,214 Manitex International Diversified Machinery 92 8.33
These stocks meet our suggested screening factors for our Cup and Handle Chart Pattern watchlist.
See Revised Rules for Trading Cup and Handle Breakouts
Major Index Summary
Index Value Change Week Change YTD Trend1
Dow 21674.5
-0.84% 9.67% Up
NASDAQ 6216.53
-0.64% 15.48% Up
S&P 500 2425.55
-0.65% 8.34% Up
1The Market Trend is derived from our proprietary market model. The market model is described on the site here.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.
Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite Dow Jones
2.18 %
NASDAQ Composite
6.47 %
NASDAQ Composite
15.48 %
Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Resorts & Casinos
Most Improved Industry (by change in technical rank2)
Drug Related Products
Foreign Utilities
Publishing - Books
Publishing - Books
Charts of each industry rank and performance over 12 months are available on the site


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