Week 11 MDA Breakout Forecast: Short-Term Picks To Give You An Edge
Summary
- Four new Breakout Stocks for Week 11 with better than 10% short-term upside potential.
- The MDA Breakout portfolio is up +37.51% YTD compared to the S&P 500 -8.00% YTD in the first 10 weeks of 2020, even including when Momentum Gauges are negative.
- This Week 10: the portfolio lost an average -4.00% led by gains in ZYXI +11.14% peaking at +19.76% midweek.
- The streak of weekly selections gaining over 10% in less than 4 or 5 trading days continues to be 121 out of 147 trading weeks (82.31%).
- The Momentum Gauges closed Friday after-hours at Negative 98 and Positive 8 since the negative signal on Feb. 24th. Use caution as MDA breakout selections may be impacted by severely negative conditions.
- This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Get started today »
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 147 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 at members' request into 2020, I now generate 4 selections each week, 2 Dow 30 picks, and a separate article for Growth & Dividend MDA breakout stocks. I now provide 6 different ways to beat the S&P 500 since my trading studies were made public.
Remarkably, the frequency streak of 10% gainers within a 4- or 5-day trading week remains at highly statistically significant levels above 80% not counting frequent multiple 10% gainers in a single week. More than 200 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017.
2020 YTD Breakout Portfolio Returns
The Breakout Picks are up +37.51% worst case, buy/hold, do nothing, equal weighted returns through Week 10 compared to the S&P 500 -8.56% over the same period. The Best case average weekly returns are +11.97% and worst case 3.75% YTD as shown below. These returns include trading during the Negative Momentum Gauge signal weeks which increases risk of declines. Week 10 closed with an average loss of -4 % compared to a gain of 0.61% for the S&P 500.
(Source: Value & Momentum Breakouts)
These breakout picks skew highly positive for high frequency short-term gains in less than 5 days as documented over the past 3 years. I have removed the best case (High YTD +119.73%) gains from the chart below next week as it begins to distort the chart between the worst case gains and the S&P 500 returns.
(Source: Value & Momentum Breakouts)
The Breakout Returns are up +140.43% since inception. These returns continue to outpace the S&P by over 3.5x after three years using the signals. Avoiding trades during the weeks when the Momentum Gauge signals turned negative as shown within the four numbered monthly periods outlined on the chart below has greatly increased total returns to over 160% since inception.
I have expected the spread of the coronavirus and negative momentum conditions over the past several weeks to start to impact returns, but selections have done well on average despite much higher risk and volatility.
(Source: Value & Momentum Breakouts)
You can see how the 4 prior events numbered above relate to the Momentum Gauge tops shown below. These forecasted market tops are detailed in the following article:
Timing your investments during the most positive momentum periods greatly enhances your weekly returns.
(Value & Momentum Breakouts)
The Momentum Gauge signals are also the basis of a significant new market neutral trading model released here for subscribers to use with bull/bear ETF combinations or just to avoid significant market downturns:
Strongest Market Timing Signals To Enhance Bull/Bear ETF Returns
(Value & Momentum Breakouts)
The bull/bear ETF trading signal turned negative on Feb. 24th for the 6th major event in the past 12 months as illustrated above. Trading on this signal has produced the following returns for members, while we still remain in the negative momentum signal through the close Friday. I am long FNGD, ERY, SPXU, SPXS following the signal from Feb. 24th with these returns:
- MicroSectors FANG+ 3x Index bull/bear (FNGU)/(FNGD) +18.15%
- Direxion Daily S&P 500 3x bull/bear (SPXL)/(SPXU) +20.71%
- SPDR S&P 500 (SPY)/ ProShares Short S&P 500 (SH) +7.50%
- Alpha Architect Intl Momentum (IMOM)/Dorsey Wright Short (DWSH) +20.00%
- ProShares UltraPro Nasdaq 3x bull/bear (TQQQ)/(SQQQ) +13.81%
- Direxion Daily 3x Small Cap bull/bear (TNA)/(TZA) +36.08%
- Direxion Daily 3x Biotech bull/bear (LABU)/(LABD) +7.27%
- Direxion Daily 3x Energy bull/bear (ERX)/(ERY) +67.02%
- MSCI 3x Emerging Market Index bull/bear (EDC)/(EDZ) +10.30%
- VIX Index 1.5x bull/bear (SVXY)/(UVXY) +112.79%
Market Conditions into Week 11
The Friday anomaly into 2020 is the complete opposite of the Friday anomaly throughout all of 2019 which so far represents by far the worst trading day of the week. Last week we saw record 4%+ positive moves on Monday and Wednesday that have pulled up the daily averages as shown below:
Strong 2020 MDA breakout stocks
There are very few stocks with any positive accelerating momentum this week. A small sample from recent weekly selections that may still have some positive momentum without detailed analysis are:
- AeroVironment (AVAV) +1.61%
- Simulations Plus (SLP) +7.70%
- Relmada Therapeutics (OTC:RLMD) +24.11%
- Agile Therapeutics (AGRX) +10.34%
- Lakeland Industries (LAKE) +25.84%
- K12 Inc. (LRN) +0.15%
- Happiness Biotech Group (HAPP) +5.95%
- Zynex (OTC:ZYXI) +11.14%
We can confirm more Fed easing in Week 10 with the largest intervention since at least 2015 of +28.5 billion as shown on the Fed's SOMA page below. This brings the total easing to $286.5 billion in liquidity just the past 19 weeks. Fed easing was a very positive condition for the markets between 2009 and 2017, it has only returned in limited form since July 31, 2019.
System Open Market Account Holdings - FEDERAL RESERVE BANK of NEW YORK
The Weekly Momentum Gauge chart below shows the Fed's actual balance sheet action in dark blue over the original Fed scheduled QT (light blue). The Weekly Momentum Gauge chart turned to a negative signal back in Week 9 with confirmation shown as the red line crosses above the green line on the chart.
(Value & Momentum Breakouts)
The more detailed Daily Momentum Gauge chart is reserved for members and reflects the last 6 months. The Momentum Gauges closed Friday after-hours at Negative 98 and Positive 8.
The MDA momentum gauges have correctly called every major market direction change since they began. These movements and signals were updated in more detail through the Daily Update articles this past week:
- V&M Breakout Morning Update - March 6: S&P 500 Back Below 2,950 With Crude Oil Down Over -4% And Fed Eased $28.5 Billion This Week.
- V&M Breakout Morning Update - March 5: S&P 500 Back Below 3,060 Level On Virus Fears. More +/- 2% Daily Market Moves In 2020 Than In All Of 2019.
- V&M Breakout Morning Update - March 4: Markets Rebounding +2.4% After Super Tuesday Results And Largest Fed Fund Rate Cut -0.5% Since 2008
- V&M Breakout Morning Update - March 3: Markets Respond As Top Central Banks Promise Action To Stabilize With G7 Finance Leaders And Central Bankers On A Call Later Today.
- V&M Breakout Morning Update - March 2: Sell-Off Continues With BOJ And Fed Signal More Stimulus This Week, Volatility Extremely High.
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 11 - 2020 Breakout Stocks for next week are:
The Week 11 stocks consist of three Healthcare and one Gold sector stock. These stocks are always released in advance to members early Friday and were hit with strong negative momentum conditions on Friday. Continue to use caution with the current negative Momentum Gauge conditions to see if an opportunity for entry emerges later in the week.
The Joint Corp. (JYNT) - Healthcare / Hospitals
Price Target: $22.00
(Source: StockRover)
| Mar-05-20 07:15 PM | The Joint Corp. Surpasses Q4 Earnings and Revenue Estimates Zacks |
| Mar-05-20 04:05 PM | The Joint Corp. Reports Fourth Quarter and Full Year 2019 Financial Results GlobeNewswire |
| Mar-05-20 03:00 PM | The Joint Corp. (United States) to Host Earnings Call ACCESSWIRE |
| Mar-04-20 07:05 AM | The Joint Corp. to Present at the 32nd Annual ROTH Conference GlobeNewswire |
| Mar-03-20 07:05 AM | The Joint Corp. Secures $7.5 Million Line of Credit with J.P. Morgan Chase Bank GlobeNewswire |
(Source: FinViz)
The Joint Corp. develops, owns, operates, supports, and manages chiropractic clinics. The company operates through two segments, Corporate Clinics and Franchise Operations. It operates through direct ownership, management arrangements, franchising, and the sale of regional developer rights. As of November 21, 2019, the company operated approximately 500 clinics in the United States.
Top Dow 30 Stocks to Watch for Week 11
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 may provide some strong additional basis for investors to judge future momentum performance for mega-cap stocks in the short to medium term. Conditions remain highly negative and additional caution is highly recommended until we see more positive reversals in the signals.
In the prior Week 10, the Dow picks of 3M Company (MMM) +2.95% and Merck & Co. (MRK) +7.37% did exceptionally well for these mega-cap selections in five days. 3M continues again this week as a top mega-cap contender.
The Dow pick for next week is:
3M Company
3M is among the better DJIA stocks in the past week that saw record declines in the worst week since 2008. Conditions are still much less than optimal, and with the Momentum Gauges still negative, caution is warranted. Early setup for recovery from oversold levels may start to breakout higher next week.
Background on Momentum Breakout Stocks
As I have documented before from my research over the years, these MDA breakout picks were designed as high frequency gainers.
The point to be made is that the Momentum Breakout model was designed to increase the frequency, i.e. the rate over time, for selecting stocks that make greater than 10% moves. I know that when using the arbitrary period of 1 week (4 or 5 trading days) this model is consistently outperforming the market at more than 4 times the expected market frequency. So what if I take a look at longer momentum survivors? Can we see decay in performance among the top stock selections? ~ Value & Momentum Breakouts 2017
The frequency percentages remain very similar to returns documented here on Seeking Alpha since 2017 and at rates that greatly exceed the gains of market returns by 2x and as much as 5x in the case of 5% gains.
(Value & Momentum Breakouts)
These percentages reflect the results from 208 MDA breakout selections through 2019 across 52 weeks with 4 stocks selected each week. MDA selections are restricted to stocks above $2/share, $100M market cap, and greater than 100k avg daily volume. An additional Stock Market column was added to compare similar groups that exclude high volatility penny-stocks below $2/share.
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.
The latest MDA breakout Growth & Dividend stocks for March have been released and are already up an average +6.93% along with the Highest Positive and Negative Scoring Forensic stocks for February.
All the very best to you and have a great week of trading!
JD Henning, PhD, MBA, CFE, CAMS
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This article was written by
JD Henning is a Finance PhD, MBA, investment adviser, fraud examiner and certified anti-money laundering specialist with more than 30 years trading and investing stocks and other securities. JD runs Value & Momentum Breakouts where he identifies identify breakout signals and breakdown warnings using technical and fundamental analysis.
Signals from his proprietary Momentum Gauges® not only alert subscribers of market changes, but the strength of markets for short term breakouts or breakdown warnings across 11 different sectors. Top stock and ETF selections use technical and fundamental systems in proven financial studies. Value & Momentum Breakouts is the place to build your own optimal portfolio mix with a community of like-minded investors and traders. Features include a Premium Portfolio, bull/bear ETF strategy, morning updates and an active chat room. Learn more.Analyst’s Disclosure: I am/we are long ERY, FNGD, SPXS, SPXU. 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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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