Week 28 Breakout Forecast: Short-Term Picks To Give You An Edge

Summary

• 8 new breakout stocks for Week 28 with better than 10% short-term upside.
• 4 new breakdown stocks for Week 28 with substantial downside potential.
• Skipped Week 27 for July 4th celebration and short trading week.
• In process of expanding MDA test database from 39,000 data points over 1 year to more than 1,740,000 data points over 26 years.

Intro

This article is part of a second period of ad hoc weekly tests beginning Week 25. The previous weekly series of out-of-sample testing focused primarily on the two segments of my research that show the most potential for highly volatile positive breakouts and negative breakdowns. The informal results of the prior 15 weeks of testing are summarized in the blog article linked here. Since the first trading week of 2017, I have been publishing a small sample of weekly breakout stock picks based on algorithms from my doctoral dissertation that identify price momentum anomalies and reversals.

These selections include both high positive momentum breakouts as well as negative momentum stocks, based on the strongest documented characteristics of short-term momentum price behaviors. The research methodology with a link to my published study can be found in my primer article on quick pick momentum accelerators. A team of statistical researchers are now assisting me in expanding the database from which the algorithms are formed in order to better test the reliability of this selection method. The improved modeling will increase the database from 1 year and 39,000 data points to well over 1.7 million data points over 26 years and uses a higher quality stock market data source. I am eager to see the test results in the coming weeks when the research is completed. Until then I am still relying on algorithms from the smaller database and continuing the ad hoc testing. I will certainly let you know when I begin testing from the larger database.

Performance Summary

The weekly and daily performance of the stocks selected last week (Week 26 in this case) are recorded here for tracking purposes. As in prior weeks a new tracking report will be posted in the comment section for Week 28 on a daily basis.

This approach by no means removes idiosyncratic risks (e.g., bankruptcy, SEC investigation, lawsuits, broad market changes, institutional fund changes, unexpected earnings announcements, loss of corporate officers, and other corporate catastrophes), but some significant probability of accurately classifying a stock into a particular momentum category for current and future momentum returns appears to exist in the short term. The ongoing out-of-sample testing provided here using unscientific sample sizes of 8 and 4 (from among thousands of stocks) is only intended to provide short-term breakout (breakdown) forecasts that may give you some trading benefit.

Benchmark Indexes End of Week 27

Selections for Week 28 are as follows:

Positive Acceleration Momentum Stocks

These stocks have strong characteristics of positive momentum into acceleration for short-term gains. The typical momentum duration horizon from this analysis appears to be one to three weeks. Based on past analysis, it is not uncommon for stocks to sustain the momentum criteria for longer periods. Some stocks from prior week selections remain strong on the parameters screened for high momentum and are reintroduced again this week. The selections of positive momentum stocks for this week include Agenus (AGEN), Conatus Pharmaceuticals (CNAT), Cogint (COGT), Barracuda Networks (CUDA), Hudson Technologies (HDSN), Hertz Global Holdings (HTZ), Verastem (VSTM), Vuzix (VUZI) :

Negative Acceleration Momentum Stocks

These stocks have strong characteristics of momentum decline into acceleration for shorting opportunities. The typical momentum duration horizon from this analysis appears to be one to three weeks. Based on past analysis, it is not uncommon for stocks to sustain the momentum criteria for longer periods. The selections for negative momentum stocks for this week include Resolute Energy Corporation (REN), Select Comfort Corporation (SCSS), Tailored Brands (TLRD ), Grana y Monetero S.A.A. (GRAM)

As always your comments on this ongoing study and resumption of testing period 2 are appreciated. A list of prior week selections and performance can be viewed here.

My personal preference is to invest in long positions and not to identify companies for shorting. However, in the interest of documenting both positive/negative momentum breakouts using my algorithms, a small sample of negative accelerators is included. As always, I hope you capture the most beneficial of these breakout (breakdown) candidates and have a profitable week of trading!

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I may initiate positions in some of the stocks mentioned over the next 72 hours.