Breakoutwatch Weekly Summary 02/29/20
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|How to Recognize a Market Bottom
(See strategy Suggestions)
The NASDAQ Comp gave up 10.5% this week but fared better than the two other major indexes. The index is 12.8% below its high putting it squarely in correction territory. The index was helped by a late rally on Friday that left the index with a slight gain on the day of 0.1%, after finding support at the 200 day moving average. The index may have been helped by comments from Apple CEO Tim Cook who said his company was working towards resuming full production in China. Starbucks also is reopening stores in China. If China does start to return to higher production levels, then fears of supply chain interruptions may decline and the markets could begin to recover. On the downside however, as the disease spreads in the US, consumer spending, which represents 70% of GDP, will inevitably fall.
While Larry Kudlow exhorts investors to buy the dip, that strategy may have worked for the NASDAQ on Friday, it did not work for the DOW or S&P 500, where each rally was met with more selling. Friday's rally on the NASDAQ should be treated with caution as more US coronavirus cases will likely be discovered over the weekend.
|If the the downward
trend continues, there will be few breakouts to the upside. One
possibility from the Cup and Handle Pattern watchlist is Owens
and Minor (OMI) which moved up strongly on Friday. If an alert
is issued on Monday, then this may be a buy.
No new features this week
How to Recognize a Market Bottom
Readers familiar with CAN SLIM will be aware of William O'Neil's concept of a "Follow-through-day". In 2011, I analyzed the effectiveness of the strategy as applied to the market bottom of March 9, 2009. You can see the analysis here. My conclusion was that although the concept correctly picked the bottom for March 9, it was not always reliable in subsequent corrections.
Consequently, I set about developing my own methodology which I call Trend Reversal Signals which you can access from the Analytical Tools menu. The tool can be used on any stock or index (IXIC,SPX,DJI). For the NASDAQ over the last 2 years the tool gives the following result. You will notice, that as with the follow-through concept, there is a delay in recognizing the change in trend as a few days must be allowed for the trend to be confirmed.
Note that the tool recognized the current reversal on 02/25, the 4th day of reversal.
|Brkout Date||Symbol||Base||Squeeze||Brkout Price||Brkout Day Close||RS Rank*||Last Close||Current % off BOP||Gain at Intraday High|
|*RS Rank on day before breakout.|
|IOTS||12.39||1,586,916||Adesto Technologies Corporation - Common Stock||Semiconductors||96||12.26|
|SILV||8.30||1,021,394||SilverCrest Metals Inc. Common Shares||Other Industrial Metals & Mining||94||6.37|
|UNIT||11.05||5,538,759||Uniti Group Inc. - Common Stock||REIT - Industrial||92||9.76|
|ELF||20.00||1,211,601||e.l.f. Beauty - Inc. Common Stock||Household & Personal Products||91||15.96|
|PRMW||15.50||1,851,264||Primo Water Corporation - Common Stock||Beverages - Non-Alcoholic||90||14.00|
|COOP||14.68||727,674||Mr. Cooper Group Inc. - Common Stock||Mortgage Finance||88||12.83|
|RESI||12.86||849,690||Front Yard Residential Corporation Common Stock||REIT - Residential||87||12.68|
|GILT||10.76||835,506||Gilat Satellite Networks Ltd. - Ordinary Shares||Communication Equipment||84||9.41|
|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 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.
|1 Week||13 Weeks||26 Weeks||Year-to-Date|
|1 Week||3 Weeks||13 Weeks||26 Weeks|
|Utilities - Renewable
|Electrical Equipment & Parts
|Closed-End Fund - Debt
|Charts of each industry rank and performance over 12 months are available on the site|
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