Week 11 Breakout Forecast: Short-Term Picks To Give You An Edge

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Includes: AGS, CRC, DWDP, LABU, MTN, NBL, VZ, YETI
by: JD Henning
Summary

Two sample breakout stocks for Week 11 with better than 10% short-term upside potential.

This week offers the new addition of two Breakdown Stocks for shorting purposes as market conditions continue to deteriorate.

Two Best of the Dow 30 for mega-cap selections this week: Verizon and DowDuPont.

Continuing from last year now makes it 81 out of 95 trading weeks (85.26%), with at least one stock move 10% or greater within a 4 or 5 days.

Total returns for the Breakout Stock selections since 2017 is +76.58% compared to +17.48% for the S&P 500 over the same trading period.

Breakout Stock Portfolio 2019 results YTD

Examining the returns for this model YTD for 2019 yields the following results:

Cumulative Weekly Max Gain YTD: +86.39% (Best case)

Cumulative Gain by Friday of the Week: -4.35% (Worst case)

For the third consecutive week, 3 out of 4 stocks reached double digits in less than five days. Selling of the breakout stocks prior to the end of the fixed 4 or 5-day holding measurement period remains the most profitable 1-week strategy so far this year.

(Source: Value & Momentum Breakouts)

The evidence is strong that you can outperform the worst-case fixed 1-week, equal-weighted minimum return measurement shown above in the 1 Week Close (blue line). Selling many of the selections prior to Friday has resulted in +86.39% return YTD (green line) best case, compared to the S&P 500 +9.42% for the same period.

To date, the last 12 stock selections have seen 9 picks (75%) achieve greater than 10% gains in less than 5 days, with 5 out of 12 picks (41%) gaining over 15%.

Breakout Stock Portfolio Total Return +76.58%

The total all-time return of the Breakout Stock picks using a fixed 5-day equal-weighted buy/hold return period is shown in the waterfall chart above. These picks are made and measured as a baseline for worst-case scenario since this model began. Following the weekly Momentum Gauge recommendations and optimal holding period changes detailed below greatly enhances the baseline returns shown above.

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 13.54% per stock. Idiosyncratic events will occur that the model cannot anticipate (e.g. earnings surprise, CEO resignation, SEC investigation etc.), so it is always a good strategy to hold a basket of stocks to diversify unpredictable risks.

(Source: Value & Momentum Breakouts)

Momentum conditions have nearly reversed into negative momentum levels last seen since September 2018 ahead of the October market correction. For this reason, I am introducing four breakdown selections using the negative acceleration parameter of segment 2 from my doctoral research. Momentum parameters have lost a high degree of positive momentum from Week 10 Breakout Selections as tracked daily through this past week and have nearly crossed into strong negative momentum conditions.

Many followers also know that I have been promoting Direxion Daily S&P Biotech Bull 3X ETF (LABU) for many weeks now. This biotech forecast was hit by unexpected news of the resignation of the FDA Chief Mr. Gottlieb who caused, "Under his watch, approvals for totally new drugs soared to 59 in 2018 from just 22 in 2016" (source). The uncertainty following this resignation, combined with the largest outflows from the stock market into 2019 and the historically poor performing sector seasonality for March, all contributed to undermine strong returns recently. As my analysis in the linked article shows, we may be seeing a strong recovery again for the healthcare sector in April and May.

The current Momentum values have declined significantly over the past 5 days, well below the 100 level and close to turning negative for the first time since September of last year. These are now some of the highest negative momentum levels we have seen since the large declines into December last year. (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 11 - 2019 Breakout Stocks for next week are:

The four Breakout Stocks to start the week consist of 2 basic materials, 1 services, and 1 consumer goods stock.

  1. Vail Resorts (MTN) - Services/Resorts & Casinos
  2. YETI Holdings (YETI) - Consumer Goods/Packaging & Containers

Vail Resorts - Services/Resorts & Casinos Price Target: 260.00 (Source: FinViz)

Mar-09-19 09:32AM The Vail Resorts Share Price Is Up 211% And Shareholders Are Boasting About It Simply Wall St.
Mar-09-19 12:15AM Edited Transcript of MTN earnings conference call or presentation 8-Mar-19 4:30pm GMT Thomson Reuters StreetEvents
Mar-08-19 09:16PM Vail Resorts Q2 2019 Earnings Conference Call Transcript Motley Fool

Vail Resorts, Inc., through its subsidiaries, operates mountain resorts and urban ski areas in the United States. The company operates through three segments: Mountain, Lodging, and Real Estate. The Mountain segment operates 11 mountain resorts, including Vail Mountain, Breckenridge Ski, Keystone, and Beaver Creek resorts in Colorado; Park City resort in Utah; Heavenly Mountain, Northstar, and Kirkwood Mountain resorts in the Lake Tahoe area of California and Nevada; Whistler Blackcomb in Canada; Stowe Mountain resort in Vermont; and Perisher in Australia, as well as 3 urban ski areas, such as Wilmot Mountain in Wisconsin, Afton Alps in Minnesota, and Mount Brighton in Michigan.

YETI Holdings - Consumer Goods/Packaging & Containers Price Target: 28.00 (Source: FinViz)

Mar-08-19 08:08AM Yeti: From Precarious IPO to Growth Darling Motley Fool
Mar-08-19 06:42AM US Dollar Hits Highest in Three Months: 5 Domestic Picks Zacks
Mar-07-19 08:54AM PlayAGS (AGS) Catches Eye: Stock Jumps 8.7% Zacks
Mar-05-19 02:17PM Yeti Could Be Poised For Further Gains on the Charts TheStreet.com

Yeti Holdings, Inc. designs, markets, and distributes products for the outdoor and recreation market under YETI brand in the United States. The company's products are designed for use in various outdoor activities, including recreational and professional pursuits targeting various categories, including hunting, fishing, camping, barbecue, farm and ranch activities, and others.

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. Members of my service receive these selections prior to the close on Friday.

The four Breakdown Stocks for shorting next week are:

  1. California Resources Corporation (CRC) - Basic Materials/Independent Oil & Gas
  2. Noble Energy (NBL) - Basic Materials/Independent Oil & Gas

Historically, using my segment 2, negative acceleration model, the movement of short positions tends to be much less significant average downturns than upsides to the breakout picks. This week is a brief reintroduction of the short model as originally applied for months in 2017 and later ended due to the lack of interest in shorting stocks.

California Resources Corporation - Basic Materials/Independent Oil & Gas Short Price Target: 16.00

California Resources Corporation operates as an oil and natural gas exploration and production company in the State of California. The company sells crude oil, natural gas, and natural gas liquids to marketers, California refineries, and other purchasers that have access to transportation and storage facilities.

Noble Energy (NBL) - Basic Materials/Independent Oil & Gas Short Price Target: 17.00

Noble Energy, Inc., an independent energy company, engages in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids worldwide. The company owns, operates, develops, and acquires domestic midstream infrastructure assets in the DJ and Delaware Basins.

Top 2 Dow 30 Stocks to Watch for Week 11

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.

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

Verizon (VZ)

Breakout above the negative price channel near 57/share with all technical indicators in positive territory and high net inflows.

(Source: FinViz)

DowDuPont (DWDP)

Inverse Head/Shoulders bullish bottom pattern with strong positive Ultimate indicator and high probability of increased price for early breakout.

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, 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.