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 108 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 90 out of 108 weeks (83.33%). More than 150 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017.
Starting at the beginning of May, we have seen the most negative signals on the Momentum Gauge since October 2018. Members have been alerted since the first signal on May 1st and we continue to have multiple weeks of trading days with negative momentum higher than positive momentum levels. See the Market Conditions section below.
Momentum Breakout Stock Portfolio 2019 results YTD
All-time total return is now +81.58%
Risk Range Graph Skews Highly Positive
Cumulative Weekly Max Gain YTD: +188.54% (Best case)
Fixed Holding Period With No Reaction to News/Events: -1.14% (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 a statistically significant result now spanning more than 100 weeks of testing.
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.
Momentum conditions are still highly negative this week. Please remain cautious, but among past selections some positive momentum may be found in: eXp World Holdings (OTC:EXPI) +19.20%, Qudian (QD) +18.10%, Veritone (VERI) +31.30%, Vail Resorts (MTN) +9.42%, YETI Holdings (YETI) +5.40%, Baozun (BZUN) +1.08%, Aratana Therapeutics (PETX) +25.19%, Conformis (CFMS) +68.80%, Chimerix (CMRX) +14.29%, uniQure (QURE) +25.96%, Zscaler (ZS) +5.87%,
Market Conditions into Week 24
Starting in week 18, the Momentum Gauge chart had the first negative cross in 31 weeks with negative momentum line above the positive momentum line. Since the May 1st negative cross, the S&P 500 has continued to decline -6.58% through the month of May.
Patterns, values, and Momentum Gauge scores have become remarkably similar to the September/October/November signals I alerted members about last year. This article linked below details some of the patterns I have observed and more have developed.
The current Weekly Momentum Gauge chart is showing slight improvement of the positive momentum conditions and declines this week in negative momentum.
(Source: Value & Momentum Breakouts)
Another way to view just the price action through Friday between the two events is shown below. We know what followed in November, but it would be quite significant if this pattern continues to follow 2018 closely into next week.
(Source: Value & Momentum Breakouts)
These conditions may be macro-event driven and could be resolved quickly with sudden trade deals or changes in Fed policy. But it is very clear that we are reentering significantly negative conditions that I last described here in October: 8 Warning Signals Of Deteriorating Market Conditions
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 24 - 2019 Breakout Stocks for next week are:
The four Breakout Stocks for Week 24 were again released earlier than usual on Friday for members to take advantage of the increasingly strong Friday market gain anomaly.
The Stock Market Friday anomaly YTD 2019
Nearly 70% of all S&P 500 gains are occurring on Fridays.
These stocks collectively gained 0.45% prior to the close for members. The Week 24 stocks consist of two technology stock and two healthcare sector stocks:
- Chimerix, Inc. (CMRX) - Healthcare / Biotechnology
- Twitter, Inc. (TWTR) - Technology / Internet Information Providers
Chimerix, Inc. - Healthcare / Biotechnology
Price Target: $4.50
|May-17-19 08:18 AM||Edited Transcript of CMRX earnings conference call or presentation 9-May-19 12:30 pm GMT Thomson Reuters StreetEvents|
|May-16-19 09:11 AM||Will Chimerix to Surge Higher? Zacks|
|May-09-19 09:25 AM||Chimerix Reports Q1 Loss, Tops Revenue Estimates Zacks|
|May-09-19 08:25 AM||Chimerix: 1Q Earnings Snapshot Associated Press|
Chimerix, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines that address unmet medical needs in the United States. The company's lead product candidate is brincidofovir, an investigational nucleoside analog for the prevention of viral infections in hematopoietic or stem cell transplant recipients (HCT), as well as for the treatment of adenovirus infection and disease, smallpox, and BK virus infection in kidney and HCT transplant recipients.
Twitter, Inc. - Technology / Internet Information Providers
Price Target: $43.00
|Jun-06-19 04:10 PM||Hedge Funds Arent Crazy About Twitter Inc Anymore Insider Monkey|
|07:45 AM||Twitter Just Showed Everyone How Far Behind Its Ad Business Is Motley Fool|
|Jun-04-19 12:37 PM||Twitter Stock Has Home-Run Potential, Analyst Says Barrons.com|
|Jun-02-19 11:52 PM||Twitter apologises for blocked China accounts ahead of Tiananmen anniversary Reuters|
Twitter, Inc. operates as a platform for public self-expression and conversation in real time. The company offers various products and services, including Twitter, a platform that allows users to consume, create, distribute, and discover content; and Periscope, a mobile application that enables users to broadcast and watch video live with others. It also provides promoted products and services, such as promoted tweets, promoted accounts, and promoted trends, which enable its advertisers to promote their brands, products, and services.
Top 2 Dow 30 Stocks to Watch for Week 24
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.
Last week's Dow Picks McDonald's Corporation (MCD) broke out with a +3.64% gain and The Travelers Companies, Inc. (TRV) had a 2.72% gain. The top two stocks for next week based on the same published breakout parameters are also previous selections:
American Express Company (AXP)
AmEx is another prior Dow breakout selection. The current high positive indicators and increasing net inflows on MFI show very strong breakout potential on the current $121/share resistance line. The stock has room to run and a $125/share seems in reach next week.
Walmart Inc. (WMT)
Walmart returns again as a prior Dow breakout selection. The ascending wedge has broken out higher with very strong positive net inflows on MFI and increasing indicators. A $110/share price target is a likely target next week.
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.
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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.