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 120 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 100 out of 122 weeks (81.9%). 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 +85.62% without application of the Momentum Gauge signals to avoid market downturns. These returns continue to outpace the S&P by over 3.2x 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 115.99% total gains since inception.
The Breakout Returns by month above shows the 3 major events since 2018 where the Momentum Gauge signals turned negative. The Momentum Gauge signals turned positive September 5th.
These market signals from the momentum gauges are contributing to a very significant new market neutral trading model for subscribers. Year to date the returns have been +148.38% using a combination trade buying the MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) bull fund on positive momentum signals and buying the MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD) bear fund on negative momentum signals as illustrated below. More details are available in the research I am providing to members. The momentum gauge signals have been very good at forecasting market tops, but as I am seeing through 2019 the predictive power for positive upturns is quite reliable as well: These 3 Measures Forecasted Every Major Downturn Since QT Started: What's Next
Examining the Average Weekly Returns
The cumulative total of top weekly breakout gains YTD 2019 is now up +282.66% and these breakouts skew highly positive in less than 5 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 gained 0.95% for the week while the Breakout Picks gained an average +5.06% to the close and reached +8.38% through the week with two stocks (BEST & HMI) gaining more than 10% in less than 5 days.
Volatility continues to increase for the 2nd half of 2019 as forecasted in my July article:
S&P 500 volatility continues to rise and the signals in each of these prior weekly articles have pointed to greater market declines. We have now had three of the largest daily declines this year in August while the prior four largest moves were over 7 months. Market volatility is still trending below the ten year average in +/- 2% S&P 500 daily moves so continue to be cautious as the momentum gauges remain highly 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 highly positive this week. Picks from prior weekly selections that may have some continued positive momentum are: Star Bulk Carriers (SBLK) +10.82%, GNC Holdings (GNC) +2.96%, Roan Resources (ROAN) +11.94%, TechTarget (TTGT) +73.58%, FormFactor (FORM) +28.09%, AcelRx Pharma (ACRX) +4.51%, MEI Pharma (MEIP) +4.69%, Echo Global Logistics (ECHO) +3.74%, Lannett Company (LCI) +67.47%, Cray Inc. (CRAY) +16.48%, Jumei Intl Holding LTD (JMEI) +6.10%, STAAR Surgical Company (STAA) +8.47%, Intrepid Potash (IPI) +9.76%, Abercrombie & Fitch (ANF) +3.87%, Affimed (AFMD) +3.51%, Yelp Inc. (YELP) +2.52%, Pixelworks (PXLW) +15.85%, Foamix Pharmaceuticals (FOMX) +14.38%, Vipshop Holdings (VIPS) +26.04%, Allegheny Technologies (ATI) +11.17% and Skechers (SKX) +6.41% from last week.
Market Conditions into Week 38
The Fed had a surprise quantitative easing (QE) event this week and actually added $5.6 billion in US treasuries to the their balance sheet. This is a positive sign after ending the QT program on July 31st but continuing with 2 weeks of additional tightening on the balance sheet. Perhaps this monetary easing is an early indicator of the Fed action on Sep 17th at the FOMC meeting. System Open Market Account Holdings - FEDERAL RESERVE BANK of NEW YORK
The Weekly Momentum Gauge chart below shows actual QT applied again last week compared to the original Fed scheduled QT (light blue). In dark blue the Fed actually had a QE event that added $5.6 billion back to the balance sheet and increased market liquidity this past week.
The red and green horizontal bars represent control levels of a pattern when average weekly negative momentum drops below 60 it has always led to a positive market reversal. Also when avg. weekly positive momentum has moved above 30 it has led to a positive market breakout. Once again the parameters set by the red and green bars predicted another early breakout signal last week for the market.
The more detailed Daily Momentum Gauge reserved for members shows very strong gains through the week after a positive cross on September 5th. This has now been confirmed on the weekly chart as another positive run in the markets ahead of the Fed FOMC meeting September 17-18 and renewed trade talks with China for October.
Subscribers saw these movements and signals in more detail through the Daily Update articles this past week. As well as updates on changes to the V&M Dashboard and a new Market Neutral trading signal using the Momentum Gauges that delivered excellent results since last year and will continue to be tested. Reports this week:
- V&M Breakout Morning Update - Sep 9: Momentum Gauge Continues Positive Into 3rd Day
- V&M Breakout Morning Update - Sep 10: Momentum Gauge Continues Positive While S&P 500 Tests Support
- V&M Breakout Morning Update - Sep 11: Premarket Positive As We Remember 9/11
- V&M Breakout Morning Update - Sep 12: S&P 500 Tops 3,000 And Momentum Gauge Tops 100
- V&M Breakout Morning Update - Sep 13: S&P 500 Testing New All Time Highs
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 38 - 2019 Breakout Stocks for next week are:
The Week 38 stocks consist of two Healthcare, one Industrial Goods, and one Services stock. Members received these selections on Friday morning ahead of the trading week with KIN gaining over +8% since release. The samples for next week are:
- Kindred Biosciences (KIN) - Healthcare / Biotechnology
- Primoris Services Corp (PRIM) - Industrial Goods / Heavy Construction
Kindred Biosciences (KIN) - Healthcare / Biotechnology Price Target: 10.00
|Sep-10-19 07:01AM||Kindred Biosciences Awarded a Contract by the National Cancer Institute in Support of the PREVENT Cancer Program PR Newswire|
|Aug-28-19 08:31AM||Kindred Biosciences to Participate in H.C. Wainwright Global Investment Conference, Lake Street Best Ideas Growth Conference, and Cantor Global Healthcare Conference PR Newswire|
|Aug-07-19 10:51AM||The Kindred Biosciences (NASDAQ:KIN) Share Price Has Gained 88% And Shareholders Are Hoping For More Simply Wall St.|
|Aug-07-19 03:33AM||Edited Transcript of KIN earnings conference call or presentation 1-Aug-19 8:30pm GMT Thomson Reuters StreetEvents|
|Aug-02-19 10:24AM||Kindred Biosciences (KIN) Q2 2019 Earnings Call Transcript Motley Fool|
Kindred Biosciences, Inc., a commercial-stage biopharmaceutical company, focusing on developing therapies for pets. Its product pipeline consists of small molecules and biologics for a range of indications in dogs, cats, and horses. The company offers Mirataz, a mirtazapine transdermal ointment for the management of weight loss in cats. It is also developing Zimeta IV and Zimeta Oral for the control of fever in horses. In addition, the company develops KIND-016, a monoclonal antibody for the treatment of atopic dermatitis in dogs; KIND-014 to treat gastric ulcers in horses; epoCat, a feline recombinant erythropoietin for the management of anemia in cats; KIND-011, a monoclonal antibody that targets sick or septic foals; and KIND-509, an antibody for canine inflammatory bowel disease.
Primoris Services Corp (PRIM) - Industrial Goods / Heavy Construction Price Target: 24.00
|Sep-09-19 07:30AM||Primoris Services Corporation Announces Utility MSA Valued Over $140 Million GlobeNewswire|
|Sep-06-19 05:00PM||Primoris Services Corporation to Attend Investor Conference GlobeNewswire|
|Sep-03-19 07:30AM||Primoris Services Corporation Announces Heavy Civil Award Valued Over $18 Million GlobeNewswire|
|Aug-30-19 11:41AM||Is Primoris Services Corporation (NASDAQ:PRIM) Overpaying Its CEO? Simply Wall St.|
|Aug-14-19 06:17AM||Are Investors Undervaluing Primoris Services Corporation (NASDAQ:PRIM) By 27%? Simply Wall St.|
Primoris Services Corporation, a specialty contractor and infrastructure company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada. The company operates through five segments: Power, Industrial, and Engineering; Pipeline and Underground; Utilities and Distribution; Transmission and Distribution; and Civil. The Power, Industrial, and Engineering segment offer a range of services, such as engineering, procurement, and construction project delivery, turnkey construction, retrofit, upgrade, repair, outage, and maintenance for entities in the petroleum, petrochemical, water, and other industries.
Top Dow 30 Stock to Watch for Week 38
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.
This week the Dow 30 stock sample from the two weekly picks:
Dow Inc. (DOW)
Dow is showing very strong positive technical breakout conditions and the price has cleared resistance at 46/share. Continuation of this strong positive momentum is likely to retest the top of the negative price channel from April and break above into a new positive price channel toward 60/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.
These momentum picks are different from the Weekly Bounce / Lag momentum picks with a 2% trailing stop loss methodology contributed weekly 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 am/we are long FNGU. 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.