The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 5 years, including nearly 100 weeks of public selections as part of this ongoing live forward-testing.
In 2017, the sample size began with 12 stocks, then 8 stocks in 2018, and now at members' request for 2019, I generate 4 selections each week. Remarkably, the frequency streak of 10% gainers within a 4- or 5-day trading week remains at highly statistically significant levels of 83 out of 99 weeks (83.84%). More than 150 stocks have gained over 10% in 5 days since this MDA testing began in 2017.
Be on the lookout for the new CFO Insider Trading Anomaly series that has produced the first week of data with average returns this week of 7.60% from the CFO purchases above the significant monetary cutoff value.
Momentum Breakout Stock Portfolio 2019 results YTD
All-time total return is now +75.43%
Risk Range Graph Skews Highly Positive
Cumulative Weekly Max Gain YTD: +108.20% (Best case)
Fixed Holding Period With No Reaction to News/Events: -5.50% (Worst case)
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). The best results are now coming from longer term holding periods beyond one-week. Holding the Breakout Stocks YTD shows 65.5% of all selections are positive with average gains of +12.22%.
This is showing a return to prior patterns in 2017 and 2018 where a fixed three and four week holding pattern became the optimal period as more data was acquired. As I always tell traders, don't fixate on holding periods or arbitrary price targets. The best gains are made by monitoring the conditions of the indicators that signaled a strong buy in the first place and hold as long as these buy conditions remain intact.
In the first week of April, Monday and Friday were the best days of the week with only one-week sampled.
(Source: Value & Momentum Breakouts)
Now with 56 stocks selected into 2019, the average top gain within 5 days has been +7.89%. The highest return YTD with a buy/hold approach is CymaBay Therapeutics (NASDAQ:CBAY) +44.55% from Week 7.
Momentum conditions remain strongest among these prior breakout stocks YTD: ChemoCentryx (CCXI) +36.11%, Denbury Resources (DNR) +8.72%, Keane Group (FRAC) +23.17%, Daseke (DSKE) +26.51%, FormFactor (FORM) +22.42%, TechTarget (TTGT) +19.83%, Marinus Pharmaceuticals (MRNS) +31.81%, Patterson-UTI Energy (PTEN) +18.78%, Cara Therapeutics (CARA) +16.53%, CymaBay +44.55%, AcelRx Pharmaceuticals (ACRX) +19.38%, PPDAI Group (PPDF) +11.65%, W&T Offshore (WTI) +28.78%, eHealth (EHTH) +13.33%, Rigel Pharmaceuticals (RIGL) +5.86%, Travelzoo (TZOO) +1.34%, Pixelworks (PXLW) +9.92%, Baozun (BZUN) +3.03% and the current set of Week 15 Breakout stocks.
Positive momentum parameters have moved significantly above 100 on the daily momentum chart for the first time since mid-March. Negative momentum has been declining very steadily through all of Week 14 Breakout. The spread between Positive/Negative values is approaching the widest gap between the two measures we have seen since February. This could also represent an overextended condition with a higher probability of pullback potential in the next couple weeks.
(Source: Value & Momentum Breakouts)
Using the signals of the Weekly Momentum Gauge may significantly improve your returns in 2019. There is a high correlation between Weekly Momentum Gauge conditions and momentum stock performance. 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 15 - 2019 Breakout Stocks for next week are:
The Breakout Stocks for the week are heavily weighted toward the healthcare sector into April based on the seasonal and money flow advantages I document here Healthcare: How high will it go in 2019?. This portfolio is already up significantly since the advanced release to members on Friday with very strong momentum for next week:
- Aratana Therapeutics (PETX) - Healthcare / Biotechnology
- PPDAI Group - Financial / Credit Services [China]
Aratana Therapeutics - Healthcare / Biotechnology
Price Target: $5.50
Aratana Therapeutics, Inc., a pet therapeutics company, focuses on the licensing, development, and commercialization of therapeutics for dogs and cats in the United States. Its product portfolio includes small molecule therapeutics and therapeutic candidates.
PPDAI Group - Financial / Credit Services [China]
Price Target: $6.00
|Mar-26-19 10:52 AM||Top Ranked Value Stocks to Buy for March 26th Zacks|
|Mar-21-19 07:51 AM||New Strong Buy Stocks for March 21st Zacks|
|Mar-18-19 01:06 PM||Why We Think PPDAI Group Inc. Could Be Worth Looking At Simply Wall St.|
PPDAI Group Inc., an investment holding company, operates an online consumer finance marketplace through its platform in the People's Republic of China. It provides services to match borrowers with investors and facilitate loan transactions on its marketplace through the lifecycle of loans.
Top 2 Dow 30 Stocks to Watch for Week 15
Applying the same breakout model parameters without regard to market cap or the below-average volatility of mega-cap stocks may produce strong breakout results relative to other Dow 30 stocks.
While I don't expect Dow stocks to outperform typical breakout stocks over the measured five-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 two stocks based on the same published breakout parameters for this week are prior picks:
Chevron Corporation (CVX)
Indicators all strongly positive with breakout conditions ready to retest $128/share resistance line. Technical conditions much more favorable for a breakout on this move than on prior attempts, watch for new 52-week high.
Strong and improving technical indicators support a price break above the negative price channel from December. Watch for increased net inflows and a retest of $46/share for new 52-week high in coming days ahead of April 30 earnings report.
These stocks continue the live forward-testing of the breakout selection algorithms from my doctoral research with continuous enhancements over prior years. These Weekly Breakout picks consist of the shortest duration picks of seven quantitative models I publish from top financial research that include one-year buy/hold value stocks.
All the very best to you and have a great week of trading!
JD Henning, PhD, MBA, CFE, CAMS
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.
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Disclosure: I am/we are long RIGL, LABU. 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.
Additional disclosure: I may initiate a long position in PPDF, PETX over the next 72 hours.