The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than five years. This subset of the different portfolios I regularly analyze has now reached 117 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 four selections each week. Remarkably, the frequency streak of 10% gainers within a four- or five-day trading week remains at highly statistically significant levels of 97 out of 118 weeks (82.05%). More than 150 stocks have gained over 10% in a five-day trading week since this MDA testing began in 2017.
Momentum Breakout Stock Portfolio 2019 results YTD
The all-time total return is now +79.92% without application of the Momentum Gauge signals to avoid market downturns. This equates to an average gain of 2.58% per month since 2017 compared to +0.94% for the S&P per month over the same time period. These returns continue to outpace the S&P by over 2.7x after nearly three years. Avoiding trades during the months when the Momentum Gauge signals are negative as shown by the three areas outlined on the chart below has resulted in 109.10% total gains (3.52% per month and 3.7x the S&P 500 from inception).
The Breakout Returns by month above shows the three major events where the Momentum Gauge signal has turned negative. The recent relatively high frequency of negative momentum alerts may be contributing to a larger market signal of decline. These measures have forecasted every major downturn since the research began in 2017:
Prior negative momentum signals have lasted beyond one month and as long as three months since the measurement began. The July 31/August 1st signal marks a third period of negative momentum in two years according to the signals.
Examining the Average Weekly Returns
The cumulative total of top weekly breakout gains YTD 2019 is now up +263.94% on high frequency breakouts and these breakouts skew highly positive in less than five days. The 2019 YTD Average Weekly Return chart below gives you an excellent perspective how the returns perform relative to the S&P 500 each week.
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 -1.04% for the week. The volatility of the returns of the four breakout picks last week ranged 6.33% with three stocks exceeding 7.4% gains in a trading week.
Volatility is continuing to increase for the second half of 2019 as forecasted in my July article:
In the past 10 days, the S&P 500 has seen two -2.9% days, and the frequency of 1% daily moves is up to 7 out of the past 10 days. We have had two of the largest daily declines this year in August and only May and January each had a daily decline of -2.4%. Market volatility is still trending more than 50% below the 10-year average in +/- 2% S&P 500 daily moves so continue to be cautious as the momentum gauges remain negative.
As I always tell traders, while these weekly measurements are only over fixed 5 day periods 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 continue to be negative for Week 34. Picks from prior weekly selections that may have some continued positive momentum are: TechTarget (TTGT) +70.82%, FormFactor (FORM) +18.36%, Dynavax Technologies (DVAX), Qudian Inc. (QD) +53.79%, Akebia Therapeutics (AKBA) +9.30%, eHealth (EHTH) +74.30%, Take-Two Interactive Software (TTWO) +31.54%, Baozun (BZUN) +12.60%, Epizyme (EPZM) +6.94%, Cryoport (CYRX) +80.37%, Syndax Pharmaceuticals (SNDX) +35.68%, NovaGold Resources (NG) +71.71%, STAAR Surgical (STAA) +23.25%, Twitter Inc. (TWTR) +6.73%, Catalyst Pharmaceuticals (CPRX) +46.56%, Zymeworks (ZYME) +20.83%, PaySign (PAYS) +10.01%, Napco Security Technologies (NSSC) +15.18%, Carbon Black (CBLK) +17.16%, Foamix Pharmaceuticals (FOMX) +27.05%, Collegium Pharmaceutical (COLL) +1.86% and Telenav (TNAV) +14.91% from last week.
Market Conditions into Week 34
On Aug 1st, the Momentum Gauge gave us only our 4th Negative Momentum breakdown signal in three years:
Daily Momentum Gauge continued negatively through the week following a negative trend from July that is very similar to the May conditions. This negative market momentum is likely to continue until the gauge crosses positive again spurred by some major positive news/catalyst. (Source: Value & Momentum Breakouts)
Subscribers saw these movements in more detail through the Daily Update articles this past week:
- Aug 14: 2Y/10Y Yield Curve Inverts First Time Since 2007
- Aug 15: 30Y UST Below 2% First Time Ever
- Aug 16: Is The Friday Anomaly Back?
The Friday anomaly depicted below shows that 70% of all the S&P 500 gains for 2019 have occurred on Fridays with the other four days combined contributing 30%. If only positive days are considered, Friday accounts for 50% of the gains among Tuesday, Thursday, and Friday results.
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.
Be sure to read this article:
Profiting With Volatility Gains As The Fed Drains for additional details, signals and profitable trades in the VelocityShares Daily 2x VIX Short-Term ETN (TVIX) to trade the signals for maximum profitability. Additional volatility instruments include the iPath S&P 500 VIX Short-Term Futures ETN (VXX), the ProShares Short VIX Short-Term Futures ETF (SVXY), the ProShares Ultra VIX Short-Term Futures ETF (UVXY), the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXXB), the ProShares VIX Short-Term Futures ETF (VIXY), among others.
The Week 34 - 2019 Breakout Stocks for next week are:
The Week 34 stocks consist of three healthcare stocks and one services stock. Members received these selections on Friday ahead of the trading week, the sample for next week are:
- Eagle Pharmaceuticals (EGRX) - Healthcare / Drugs - Generic
- Vipshop Holdings LTD (VIPS) - Services / Catalog & Mail Order
Eagle Pharmaceuticals (EGRX) - Healthcare / Drugs - Generic Price Target: 65.00 (Source: Finviz)
|Aug-14-19 10:29AM||New Strong Buy Stocks for August 14th Zacks|
|Aug-11-19 12:29PM||Edited Transcript of EGRX earnings conference call or presentation 8-Aug-19 12:30pm GMT Thomson Reuters StreetEvents|
|Aug-09-19 06:23AM||Eagle Pharmaceuticals Inc (EGRX) Q2 2019 Earnings Call Transcript Motley Fool|
|Aug-08-19 08:45AM||Eagle Pharmaceuticals (EGRX) Beats Q2 Earnings and Revenue EstimatesZacks|
Eagle Pharmaceuticals, Inc., a specialty pharmaceutical company, focuses on developing and commercializing injectable products primarily in the critical care and oncology areas in the United States. The company offers Argatroban, an anti-coagulant thrombin inhibitor for heparin-induced thrombocytopenia; Ryanodex for malignant hyperthermia; Bendeka for chronic lymphocytic leukemia and indolent B-cell non-Hodgkin's lymphoma; and Belrapzo, a chemotherapeutic agent for CLL and Indolent NHL.
Vipshop Holdings LTD (VIPS) - Services / Catalog & Mail Order Price Target: 9.50 (Source: Finviz)
|Aug-17-19 06:09AM||Edited Transcript of VIPS earnings conference call or presentation 15-Aug-19 12:00pm GMT Thomson Reuters StreetEvents|
|Aug-16-19 12:39PM||Sarah Ketterer's 5 Largest Buys of the 2nd Quarter GuruFocus.com|
|Aug-15-19 05:23PM||Vipshop Holdings Limited (VIPS) Q2 2019 Earnings Call Transcript Motley Fool|
|Aug-15-19 12:50PM||Vipshop Stock Is Finally Bouncing Back Motley Fool|
|Aug-15-19 11:54AM||Why Vipshop Holdings Stock Soared Today Motley Fool|
Vipshop Holdings Limited operates as an online discount retailer for various brands in the People's Republic of China. It operates in two segments, Vip.com and Internet Finance Business. The company offers women's apparel, such as casual wear, jeans, dresses, outerwear, swimsuits, lingerie, pajamas, and maternity clothes; men's apparel comprising casual and smart-casual T-shirts, polo shirts, jackets, pants, and underwear; women and men casual and formal shoes; and accessories that include belts, jewelry, watches, and glasses for women and men.
Top 2 Dow 30 Stocks to Watch for Week 34
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 sample stock from the two selections is Procter & Gamble (NYSE:PG):
The Procter & Gamble Company
Procter & Gamble is in a very strong positive price channel with improving technical indicators. A retest to the top of the price channel around 123/share is likely, and on strong positive momentum, a move above 125 on strong technical conditions and improving investor sentiment may drive the price higher.
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. These momentum picks are different from the Weekly Bounce / Lag momentum picks provided by Prof. Grant in his weekly selections.
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.