The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 5 years. This subset of the different portfolios I regularly analyze has now reached 102 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 85 out of 102 weeks (83.33%). More than 150 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017.
The first article for April on the CFO Insider Trading Anomaly is complete and should be out shortly entitled, CFO Insider Trading Anomaly: April Results +4.53%.
Momentum Breakout Stock Portfolio 2019 Results YTD
All-time total return is now +77.08%.
Risk Range Graph Skews Highly Positive
Cumulative Weekly Max Gain YTD: +137.92% (Best case).
Fixed Holding Period With No Reaction to News/Events: -2.67% (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. 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 offered by analysts with no clear time horizon. 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.
Year to date through May 3rd, the largest gains of the week for the S&P 500 are occurring on Friday and accounting for nearly 59% of all the index gains this year.
(Source: Value & Momentum Breakouts)
Momentum conditions remain strongest among these prior breakout stock picks for 2019: ChemoCentryx (CCXI) +18.52%, Daseke (DSKE) +32.77%, FormFactor (FORM) +25.03%, TechTarget (TTGT) +25.78%, Marinus Pharmaceuticals (MRNS) +33.52%, CymaBay Therapeutics (CBAY) +38.84%, Cara Therapeutics (CARA) +17.00%, AcelRx Pharmaceuticals (ACRX) +26.64%, PPDAI Group (PPDF) +52.41%, Qudian (QD) +40.86%, YETI Holdings (YETI) +31.96%, Travelzoo (TZOO) +22.43%, Energy Recovery (ERII) +16.47%, ANGI Homeservices (ANGI) +10.72%, Baozun (BZUN) +17.70%, Aratana Therapeutics (PETX) +22.11%, BEST Inc. (BEST) +18.92%, Cryoport (CYRX) +17.57%, The Meet Group (MEET) +7.50% and the current set of Week 19 Breakout stocks several of which are also in the Premium Portfolio.
The Momentum Gauge daily chart had the first negative cross in 31 weeks with the negative momentum line above the positive momentum line for 2 days this past week. The last time this signal occurred it was in Week 39 at the end of September 2018 and market deteriorated quickly into October. The other unique similarity is that the Fed conducted the largest asset rolloff event (QT) on May 1st that we have seen since October. These effects are detailed more in the appendix of this article. The good news is that on Friday, we experienced a very strong positive momentum recovery on the heels of record improvement on the April Jobs Report. We should continue to watch this closely, but it appears that while the QT effect made a significant impact, it was subsequently offset by strongly positive macroeconomic news on US jobs.
The Weekly Momentum Gauge Chart is showing a continued decline of positive momentum and a slow increase in negative momentum from January.
(Source: Value & Momentum Breakouts)
Using the signals of the Momentum Gauge may significantly improve your returns in 2019 and protect your investments. 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 19 - 2019 Breakout Stocks For Next Week Are:
The two Breakout Stocks to start the week consist of two healthcare sector stocks:
Codexis, Inc. discovers, develops, and sells protein catalysts. It also offers intermediate chemicals products that are used for further chemical processing, and Codex biocatalyst panels and kits that enable customers to perform chemistry screening.
|Apr-30-19 10:54AM||3 Stocks That Could Help You Send Your Kids to College Motley Fool|
|07:00AM||Codexis Signs Multi-Year Enzyme Supply and Licensing Agreement with Tate & Lyle for the Manufacture of TASTEVA® M Stevia Sweetener GlobeNewswire|
|Apr-29-19 07:00AM||Codexis to Hold First Quarter 2019 Conference Call on May 6 GlobeNewswire|
|Apr-19-19 02:09PM||Investors Who Bought Codexis (CDXS) Shares Five Years Ago Are Now Up 1053% Simply Wall St.|
Price Target: 10.00
|May-02-19 09:30AM||Is Lannett Co. (LCI) Stock Outpacing Its Medical Peers This Year? Zacks|
|Apr-30-19 12:23PM||Lannett to launch generic ADHD drug this quarter American City Business Journals|
|Apr-30-19 06:52AM||Lannett To Launch Generic Concerta®, AB-rated Methylphenidate Hydrochloride ER Tablets PR Newswire|
Lannett Company, Inc. develops, manufactures, packages, markets, and distributes generic versions of brand pharmaceutical products in the United States. The company offers solid oral and extended release, topical, liquid, nasal, and oral solution finished dosage forms of drugs that address a range of therapeutic areas, as well as ophthalmic, patch, foam, buccal, sublingual, suspension, soft gel, and injectable dosages.
Top 2 Dow 30 Stocks To Watch For Week 19
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 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 two stocks based on the same published breakout parameters for this week are also prior picks:
American Express Company (AXP)
Selected in previous weeks, AXP continues in strong technical breakout momentum conditions at new highs. Indicators are all strongly positive with breakout conditions accelerating. Net MFI inflows are still building and not at overbought levels. The average true range ATR indicator reflects a very low relative range with potential for much higher upside movement.
Pfizer Inc. (PFE)
Selected previously, Pfizer continues to make new positive rungs to test the top of the negative price channel. The convergence of many technical indicators into positive breakout levels suggests a stronger move that could break above the $43/share resistance level in the coming days. This would be confirmation of a new positive price channel and a retest of 52/week highs around $46/share.
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 every Friday.
Appendix: Reviewing The QT Impact This Week
Fortunately, it is not often that we see QT events in excess of $30 billion as part of the Federal Reserve's balance sheet normalization policy. When they do occur, it is worthwhile to review the impact and assess what may happen next.
As I have written and discussed at length with readers, these events have had significant correlation with VIX volatility events. The May first roll off shown below was among the largest scheduled in the entire program.
As you can see on the S&P 500 5-day chart below, the May 1 event coincided with a large drop in the markets as liquidity was tightened through the Fed policy. The Friday recovery may be attributed to the very strong April jobs report that topped expectations by over 38%. This macroeconomic offset may have been a strong enough event to counter the continuation of a market decline from tightening monetary policy.
According to the NY Fed's SOMA page: System Open Market Account Holdings - FEDERAL RESERVE BANK of NEW YORK The actual reduction in balance sheet assets from last week was -$37.69 billion. This actual reduction is once again very close to the scheduled value of the future weekly asset roll-offs through the end of 2019 shown below.
The most positive news going forward is that the next very large QT event is not scheduled until July. Also the quick market rebound this week from a $30+ billion reduction provides a good sign that market conditions are able to weather these larger events much better than we experienced last year. Let us hope these market conditions can sustain even as many more QT events remain on the schedule for 2019.
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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.