Breakout Forecast Selections for Week 42:
The momentum gauge conditions have declined significantly over the past several weeks since Week 39. These declines have signaled very profitable hedge positions in VelocityShares Daily 2x VIX Short-Term ETN (TVIX) and BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD) - see charts below. The positive momentum gauge is now down to 15 from a value of 65 at the end of Week 39 and a value of 27 for the past Week 41.
In Week 34 of last year, the positive momentum gauge set its all-time highest score of 120 since the momentum gauge has been put to use. The all-time low for the positive momentum gauge is 6 during this past Week 41.
The negative momentum score has increased significantly to 91 from a low/medium condition of 36 at the end of Week 39 and up from 53 this past Week 41. The negative momentum value reached a record high this past week of 100 that has changed the maximum scale of the negative momentum gauge to 100.
Last week's report: Week 41 Breakout Forecast
My momentum gauges are based on the count of the momentum stocks screened as either positive accelerating or negative accelerating stocks based on my research algorithm. The combination of the two different types of momentum categories screened by segments 2 and 6 of my algorithm may help validate the quality of the overall market momentum strength.
I have been documenting the increasing signs of market deterioration and breakout conditions for inverse hedge trades from October 4th that are discussed and highlighted in more detail from our live V&M Chat Room Daily Summary Articles.
One example is the TVIX (2x VIX volatility bull fund) that signaled an early breakout on October 3rd, followed by a buy signal on Thursday, October 4th as shown below:
Another example is the ongoing FANG (Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG)) bull fund, BMO REX MicroSector FANG+ Index 3X Leveraged ETN (FNGU), deterioration and breakout conditions of the inverse bear fund FNGD that reached a high of $37.67/share this past week:
These FANG stocks represent a significant portion of the Nasdaq 100 index and are widely held among most of the top investment funds. Increasingly adverse performance of these five stocks could have a major impact on the markets. Use caution going into Week 42 as all indicators show we could see more downside. More discussion and detail on the broad market conditions are available in the Chatroom and Summary Articles for members.
Total Return Chart: +88.49%
The Total Return Chart reflects total return of all stocks in the weekly portfolio.
Last Week 41, GOL Linhas Aereas Inteligentes S.A. (GOL) was the best performer with a gain of +16.43% despite the broad market selloff. This week I have selected 8 breakout stocks from the following sectors: 3 healthcare, 2 services, 1 consumer goods, and 2 technology stocks.
The two public sample selections of positive breakout stocks for this week include:
- Cambium Learning Group (ABCD) - Services / Education & Training
- Adecoagro S.A. (AGRO) - Consumer Goods / Farm Products
Caution: These stocks are not necessarily recommended for long-term buy/hold unless you are comfortable with very large price swings. These are the most volatile selections I offer from among all the different Value & Momentum portfolios.
As I continue to observe, strong momentum events usually last from one to three weeks and may encounter some substantial decline before returning again to positive gains. Proposed entry points for each of the selected stocks are as close to the highlighted prices in yellow on the charts at market open.
Breakout Stock Selections for Week 42
Note: all breakout stocks are selected based on my algorithm to increase the frequency of 10% gains within a very short period of time. Price targets are estimated through an unrelated technical charting process for those who are looking for estimated exit points; however, it is possible the momentum in these selections may move well beyond the initial target.
Sample Pick #1: Cambium Learning Group - Services / Education & Training
Price Target: $14.50
|Sep-17-18 04:27 PM||Edited Transcript of ABCD earnings conference call or presentation 13-Aug-18 9:00 pm GMT Thomson Reuters StreetEvents|
|Sep-13-18 09:56 AM||Adtalem's ACAMS Partners With Finva for Nordic Countries Zacks|
|Aug-28-18 06:00 AM||Learning A-Z Named One of the Top Companies to Work for in Arizona GlobeNewswire|
Cambium Learning Group, Inc. provides educational technology solutions in the United States and internationally. It operates in three segments: Learning A-Z, ExploreLearning, and Voyager Sopris Learning. The Learning A-Z segment offers PreK-6 technology-enabled learning resources. It operates subscription-based websites, including Reading A-Z, Raz-Kids, Headsprout, Science A-Z, Writing A-Z, Vocabulary A-Z, and ReadyTest A-Z, that provide online supplemental books, lessons, assessments, and other instructional resources for individual classrooms, schools, and districts.
Sample Pick #2: Adecoagro S.A. - Consumer Goods / Farm Products
Price Target: $9.00
|Oct-01-18 07:48 AM||At US$7.35, Is Adecoagro SA ((AGRO)) Worth Looking At Closely? Simply Wall St.|
|Sep-28-18 06:46 PM||Adecoagro S.A. -- Moody's affirms Adecoagro Ba2 ratings; stable outlook Moody's|
|Sep-03-18 04:05 PM||Edited Transcript of AGRO earnings conference call or presentation 17-Aug-18 1:00 pm GMT Thomson Reuters StreetEvents|
Adecoagro S.A., an agricultural company, engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. The company engages in the planting, harvesting, and sale of grains, oilseeds, and fibers, including wheat, corn, soybeans, cotton, sunflowers, and other; provision of grain warehousing/conditioning, handling, and drying services to third parties; and purchase and sale of crops produced by third parties.
2018 YTD Chart: +47.30%
Cumulative return with 1-week holding period.
A detailed holding period analysis for Q1 2018 sampled Breakout Stocks is available here for review: Value & Momentum Breakout Stock Returns For Q1 2018
Top BO Gainers last four weeks: Farmmi Inc. (NASDAQ:FAMI) +6.53%, Vanda Pharmaceuticals (VNDA) +9.27%, Medallion Financial (MFIN) +6.98%, QEP Resources (QEP) +4.79%, STRATA Skin Sciences (SSKN) +10.84%, GOL Linhas Aereas Inteligentes S.A. (GOL) +16.43%
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I think these breakout stocks will serve you well in Week 42 and beyond. I hope you all do well with these stocks and always diversify to minimize some of the market risks.
All the very best and have a great week of trading!
JD Henning, PhD, MBA, CFE, CAMS
Disclosure: I am/we are long ESTE, PTEN, VUZI. 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.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.