Seeking Alpha

Week 30 Breakout Forecast: Short-Term Picks To Give You An Edge

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Includes: ARAY, CARA, CODA, ERII, INTC, PVG, TTGT, YETI
by: JD Henning
Summary

Two sample Breakout Stocks for Week 30 with better than 10% short-term upside potential.

The Breakout Stock selections are up +8.29% for July with two stocks gaining 7%+ last week, while the S&P 500 declined -1.23% for the week.

The streak continues now with 94 out of 114 trading weeks (82.46%), with at least one stock move 10% or greater in 4 or 5 trading days.

Two Best of the Dow 30 for mega-cap selections are Intel Corporation and Microsoft.

The Momentum Gauge indicators continue to weaken from last week with Positive at 39 and Negative at 36.

Introduction

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 114 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 94 out of 114 weeks (82.46%). More than 150 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017.

Momentum Breakout Stock Portfolio 2019 Results YTD

The all-time total return is now +83.30% without application of the Momentum Gauge signals to avoid market downturns. Returns through July so far are up +8.29% after the signals turned positive again.

Avoiding trades during the months when the Momentum Gauge signal turned negative as shown by the two areas outlined on the chart would have resulted in 105.14% total gains. (See the Weekly Momentum Gauge chart below)

Examining the Average Weekly Returns

The cumulative total of top weekly breakout gains YTD is now up +228.52%, and these breakouts in less than 5 days skew highly positive compared to the cumulative S&P 500 returns of +18.74%. However, in order to show the breakout frequency more clearly, the YTD Average Weekly Returns graph will now replace the Risk Range Graph available in prior breakout articles.

The graph above compares the average weekly S&P 500 gains YTD against the best-case and worst-case average returns of the top weekly breakout gains YTD. The S&P 500 lost -1.23% for the week. The average return of the 4 breakout picks last week was +1.78%, with two stocks gaining 7% in less than 4 trading days, but no 10% gains. The average high for last week's stocks was +5.75%. This remains a statistically significant result now spanning more than 100 weeks of testing.

As I always tell traders, don't fixate on firm 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 preserve gains for as long as these buy conditions remain intact.

Momentum conditions are still positive heading into Week 30 but in a steady decline for the past few weeks. A sample of five prior picks that are showing some positive momentum conditions are: TechTarget (TTGT) +55.74%, Cara Therapeutics (CARA) +53.50%, YETI Holdings (YETI) +37.70%, Pretium Resources (PVG) 31.11%, Energy Recovery (ERII) +26.06%, eHealth Inc. (NASDAQ:EHTH).

Market Conditions into Week 30

This past week, the Momentum Gauge moved lower positive, while the negative momentum increased further. The Weekly Momentum Gauge chart shows a continuation of a trend toward negative crossover and weakness in the market highs in the short term. We are at a higher risk of a market downturn here as we saw back at the end of April when the S&P 500 declined over 6% in May. (Source: Value & Momentum Breakouts)

Currently, momentum gauge sentiment and money flow indicators are still positive with declining conditions and increasing negative momentum through last week.

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.

Getting Ahead of Powerful Capital Flows into Stocks

This week, I highlighted some additional capital flows that are important to the selection of momentum stocks, especially these very short-term breakout selections. Professors Charles Cao, Yong Chen, William N. Goetzmann, and Bing Liang have made another significant contribution to finance in their recent article in the CFA Institutes' Financial Analyst Journal entitled, "Hedge Funds and Stock Price Formation."

My summary article of Cracking the Hedge Fund Code sheds some light on how the $3 trillion in Hedge Fund managed assets can have a significant impact on markets and what types of stocks they are looking for to obtain alpha.

In my prior article, I focused on different flows in the market that are driving the S&P 500 and other indexes to record highs. My thoughts on what could happen and what to look for in the second half of the year are offered here:

S&P 500 On Pace For Highest Returns In 60 Years With Rising Fears

The Week 30 - 2019 Breakout Stocks for next week are:

The Week 30 stock sample consists of one industrial goods stock, two healthcare stocks, and one technology stock. Members have already seen a net gain since Friday's early release:

  1. Accuray Inc. (ARAY) - Healthcare/Medical Appliances & Equipment
  2. Coda Octopus Group (CODA) - Industrial Goods/Aerospace-Defense

Accuray Inc. - Healthcare/Medical Appliances & Equipment Price Target: 5.00 (Source: FinViz)

Jul-19-19 07:30AM Accuray To Report Fiscal 2019 Fourth Quarter and Full Year Financial Results on August 15, 2019 PR Newswire
Jul-18-19 07:30AM Swiss Medical Network Advances Cancer Care in Switzerland with Multi-System Agreement for Accuray Radiation Therapy Systems and RaySearch Oncology Software Systems PR Newswire
Jul-12-19 10:15AM How Does Investing In Accuray Incorporated (NASDAQ:ARAY) Impact The Volatility Of Your Portfolio? Simply Wall St.
Jun-23-19 08:55PM Is Accuray Incorporated (ARAY) A Good Stock To Buy? Insider Monkey

Accuray Incorporated designs, develops, and sells radiosurgery and radiation therapy systems for the treatment of tumors in the body. The company offers the CyberKnife System, a robotic stereotactic radiosurgery and stereotactic body radiation therapy system used for the treatment of various types of cancer and tumors in the body.

Coda Octopus Group - Industrial Goods/Aerospace-Defense Price Target: 18.00 (Source: FinViz)

Jun-14-19 12:56PM A Look At Benzinga Pro's Most-Searched Tickers For June 14 Benzinga
Jun-13-19 10:53AM An Interesting Small-Cap on My Radar This Morning Is Coda OctopusTheStreet.com
Jun-13-19 06:00AM Coda Octopus Group Reports Fiscal 2019 Second Quarter Financial Results GlobeNewswire

Coda Octopus Group, Inc., together with its subsidiaries, develops and sells underwater technologies and equipment for imaging, mapping, defense, and survey applications in the United States, Europe, and Australia. The company operates through two segments, Marine Engineering Business and Marine Technology Business.

Top 2 Dow 30 Stocks to Watch for Week 30

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.

One of the top two stocks for next week based on the same published breakout parameters are also previous selections:

Intel Corporation (INTC)

Intel continues in strong positive breakout conditions from last week with improving net inflows and strong positive momentum indicators. The current technical breakout cleared the 50/share and retest as forecasted and will be approaching prior resistance at 52/share in the near term.

Conclusion

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.

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.