Breakoutwatch Weekly Summary 08/29/20

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Weekly Commentary
NASDAQ Gains 3.5%; Are we in a Bubble?

The rise of the NASDAQ seems inexorable and understandably investors are nervous as comparisons are made to the dot com bubble of 2000. That bubble was driven by speculation in the internet-related companies of the day, just as the NASDAQ is today being driven by today's equivalent: the FAANG stocks (Facebook,Apple, Amazon,Netflix and Google) plus Microsoft. The bubble was driven by the easy availability of venture capital and the abandonment of traditional valuation metrics such as P/E ratios. When the bubble burst, the NASDAQ Composite dropped 78%.

Today, the Federal Reserve is playing the role of the venture capitalists of the 2000's. This week, the Fed announced that it was abandoning it's 2% inflation target. It had already announced that interest rates would stay close to zero until 2022 and has injected $3 trillion into financial markets since February. With interest rates so low, companies can borrow cheaply to fund investment, and the corollary is that investors have no where else to go for income than the stock market.

Australian writer Colin Twiggs in his newsletter this week proposes one way to think about the potential bubble is to compare corporate profits to market capitalization. Under this analysis when corporate profits are low compared to valuations, then stock prices are overvalued. His chart below, with my annotations, indicates we are getting close the levels of the 2000 bubble.

twiggs chart

Chart of the Week
Safehold Inc. (SAFE) is in a Volatility Squeeze and appears ready to breakout to the upside. The chart shows it has plenty of potential to gain up to 20% back to the pivot point if its previous cup and handle pattern.

SAFE Chart

New Features this Week

No new features this week
Strategy Suggestions
Our latest strategy suggestions are here.

I was asked a question on the Support Forum about a statement in our "How to Use Our Site" page about how to recognize a flawed base. The answer is here.
Breakouts Summary by Watchlist for Week Beginning 08/24/20
List Breakouts Avg. Gain
CWH 1 0.4
SQZ 5 5.13
HTF 1 -2.79
DB 1 2.56
Breakouts Detail for Week Beginning 08/24/20
Brkout Date Symbol Base Squeeze Brkout Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
2020-08-25 CCH SQZ y 13.91 15 84 16.34 17.47% 22.21%
2020-08-26 CCH SQZ y 15.01 15.8 87 16.34 8.86% 13.26%
2020-08-27 IMAB SQZ y 30.20 31.24 96 31 2.65% 12.52%
2020-08-26 NFLX DB n 510.82 547.53 85 523.89 2.56% 7.47%
2020-08-25 AMRC CWH n 32.55 34.2 93 32.68 0.4% 7.1%
2020-08-24 BLDP SQZ y 16.23 16.49 96 15.99 -1.48% 9.67%
2020-08-25 SWTX SQZ y 44.90 44.96 89 44.07 -1.85% 7.86%
2020-08-25 DQ HTF n 128.76 133.37 97 125.17 -2.79% 6.42%
*RS Rank on day before breakout.
Top Rated Cup and Handle Stocks as of Friday August 28, 2020
Symbol BO
Company Industry RS
FUV 8.23 2,490,706 Arcimoto - Inc. Recreational Vehicles 98 6.50
FSK 17.25 1,128,050 FS KKR Capital Corp. Asset Management 98 16.07
SURF 7.20 1,192,450 Surface Oncology - Inc. Biotechnology 95 6.19
OESX 6.21 618,735 Orion Energy Systems - Inc. Electrical Equipment & Parts 93 6.17
CBB 15.14 687,933 Cinci Telecom Services 92 15.05
EQT 17.97 7,133,532 EQT Corporation Oil & Gas E&P 92 16.02
LCA 16.86 5,228,536 Landcadia Holdings II - Inc. Shell Companies 90 15.29
CNX 12.27 5,891,062 CNX Resources Corporation Oil & Gas E&P 89 11.30
UNIT 10.50 2,095,503 Uniti Group Inc. REIT - Industrial 82 9.85
LPL 6.59 531,453 LG Display Co - Ltd AMERIC Consumer Electronics 81 6.35
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 28653.9
2.59% 0.4% Up
NASDAQ 11695.6
3.39% 30.35% Up
S&P 500 3508.01
3.26% 8.58% 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 NASDAQ Composite
NASDAQ Composite
NASDAQ Composite
Best Performing Industry
1 Week 3 Weeks 13 Weeks 26 Weeks
Medical Distribution

Most Improved Industry (by change in technical rank2)
Agricultural Inputs
Furnishings, Fixtures & Appliances
Charts of each industry rank and performance over 12 months are available on the site


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