Week 5 Breakout Forecast 2019: Short-Term Picks To Give You An Edge

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Includes: AAPL, CAT, FORM, SOGO
by: JD Henning
Summary

Two new breakout stocks for Week 5 with better than 10% short-term upside potential.

Two Best of the Dow 30 for Week 5 mega-cap selections based on breakout model characteristics are Apple, Inc. and Caterpillar, Inc.

Continuing from last year now makes it 76 out of 90 trading weeks (84.44%), with at least one stock move 10% or greater within a 4- or 5-day trading.

Total returns for the Breakout Stock selections since 2017 is 74.11% compared to 14.44% for the S&P 500 over the same trading period.

Breakout Stock Portfolio 2019 results YTD

Cumulative Weekly Max Gain YTD: +37.66%

Cumulative Gain by Friday of the Week: -1.91%

Last week was a four-day trading week, some of these stocks may continue strong into next week. We are still seeing that selling the breakout stocks in 4 days or less is currently the most profitable 1 week strategy. A noticeable selloff continues on Fridays that is gaming returns. Also, as I monitor results for optimal holding periods over multiple weeks on the Breakout Stock spreadsheet for members, I am seeing that the two-week hold through the following Thursday is currently generating the best overall results. Week 5 is another full five-day trading week.

(Source: Value & Momentum Breakouts)

The evidence is strong that you can outperform the fixed 1-week, equal weighted measurement shown above in the 1 Week Close {blue line}. Selling many of the selections prior to Friday has resulted in +37.66% return YTD {green line} compared to the S&P 500 +6.87% for the same period.

So far, the returns above represent a distinct pattern among traders in high momentum volatility breakout selections who are exiting positions ahead of the Friday close for the week. As the table shows below, for the past 8 selections for 2019 so far, the best returns were generally achieved in fewer than four days with an average top gain of 9.22% per stock.

(Source: Value & Momentum Breakouts)

Momentum parameters have continued to improve from Week 4 Breakout Selections. For Week 5, the selections begin the week with Momentum values at 68 Positive and 9 Negative. These are some of the highest positive and lowest negative momentum levels we have seen on this gauge since early 2018. A significant reversal occurred Friday on news that the Fed may end their quantitative tightening program early.

(Source: Value & Momentum Breakouts Dashboard)

Using the signals of the Momentum Gauge may significantly improve your returns in 2019. Two conditional signals that are very important to watch:

  • Avoid/Minimize trading when the Negative score is higher than the Positive momentum score.
  • Avoid/Minimize trading when the Negative score is above 70 on the gauge.

The Week 5 - 2019 Breakout Stocks for next week are:

The two breakout stocks to start Week 5 consist of two technology stocks:

  1. Sogou, Inc. (SOGO) - Technology/Internet Information Providers
  2. FormFactor, Inc. (FORM) - Technology/Semiconductor - Broad Line

Sogou, Inc. - Technology/Internet Information Providers

Price Target: $7.50

(Source: FinViz)

Jan-14-19 09:00 PM Robbins Arroyo LLP: Sogou Inc. Misled Shareholders According to Class Action Business Wire
06:00 PM Sogou CEO Xiaochuan Wang Delivers Keynote Speech at 2019 Las Vegas "China Night" PR Newswire
Jan-11-19 08:30 PM Sogou Named "Global AI Industry Top Brand of the Year" by IDG PR Newswire

Sogou Inc. provides search and search-related services in the People's Republic of China. The company provides Sogou Search, a search engine; and Sogou Input Method, a Chinese language input software for mobile and PC MAUs.

FormFactor, Inc. - Technology/Semiconductor - Broad Line

Price Target: $17.00

(Source: FinViz)

Jan-24-19 08:21 AM These Factors Make FormFactor, Inc. An Interesting Investment Simply Wall St.
Jan-22-19 04:55 PM FormFactor to Announce Fourth Quarter 2018 Financial Results on February 6th GlobeNewswire
Jan-16-19 07:45 AM New Research: Key Drivers of Growth for Main Street Capital, Northrop Grumman, Verisk Analytics, Celanese, FormFactor, and Kopin Factors of Influence, Major Initiatives and Sustained Production GlobeNewswire

FormFactor, Inc. designs, manufactures, and sells probe cards, analytical probes, probe stations, integrated measurement systems, thermal sub-systems, and reliability test systems.

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. Entry price points are highlighted in yellow as a general point of entry as market conditions allow in the next trading session.

Top 2 Dow 30 Stocks to Watch for Week 5

Applying the same breakout model parameters without regard to market cap or the below average volatility of mega-cap stocks may produce similar strong results relative to other Dow 30 stocks. These selections continue to produce strong results in the following week.

While I don't expect Dow stocks to outperform typical breakout stocks over the measured 5-day breakout period, it should provide some strong additional basis for investors to judge future performance for mega-cap stocks in the short to medium term. The top 2 stocks based on the same published breakout parameters for week 5 are:

Apple Inc. (AAPL)

Caterpillar Inc. (CAT)

(Source: FinViz)

All of these key weekly and monthly selections feed into the Premium Portfolio database selection model portfolio that is now up 13.72% YTD

All the very best to you and have a great week of trading!

JD Henning, PhD, MBA, CFE, CAMS

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SOGO, AAPL, FORM, CAT over 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.