Week 17 MDA Breakout Stocks - April 2021: Short-Term Picks To Give You An Edge

Apr. 25, 2021 7:08 AM ETAAPL, ACET, AMGN, CAT, CRM, CSCO, CTTRF, CVX, JPM, JPM.PC, JPM.PD, JPM.PG, JPM.PH, MMM, MSFT, VLRS, WBA3 Comments6 Likes

Summary

  • Two new breakout stocks for Week 17 with better than 10% short-term upside potential.
  • For only the 2nd time this year, none of the 4 picks broke above 10% this week in the first negative week for the S&P 500 in 5 weeks.
  • 2021 MDA minimal portfolio returns are -7.4% and maximal +250.8% YTD with 33 out of 64 picks (51.5%) gaining over 10% in less than a week.
  • The streak of weekly picks gaining over 10% in less than a week of trading days continues to 171 out of 204 trading weeks (83.8%) not counting multiple gainers.
  • The MDA breakout picks completed 2020 up +73.4%, beating the S&P 500 for the 4th consecutive year with avg. annual returns of +43.8%.
  • This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Learn More »

Emerald green wave breaking in the ocean
Photo by lindsay_imagery/E+ via Getty Images

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 6 years. This subset of the different portfolios I regularly analyze has now reached 200 weeks of public selections as part of this ongoing live forward-testing research.

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 monthly Growth & Dividend MDA breakout stocks. I now offer 10 top models of short and long term value and momentum portfolios that have beaten the S&P 500 since my trading studies were made public.

(Source: VMBreakouts.com) Red weekly color shows how poorly market momentum and investor enthusiasm sustains through the week when the Momentum Gauges are negative. This is well documented in my research over the past 4 years.

Frequently Asked Questions

I would like to briefly highlight three important questions I am regularly asked by members that will certainly help many regular readers of my public articles. These and many more questions are covered in detail in the articles and annual performance reports of the more than 10 different portfolio types offered at V&M Breakouts. It is very important to understand the model for the best possible results and timing.

1. Why are the Momentum Gauges negative but the market is going up?

The Momentum Gauges® assesses the conditions of over 7,500+ stocks of all sizes across the major US stock exchanges, but not including over 10,000+ stocks on the OTC market. However, fewer than 630 stocks comprise the major stock "market" indices. Some stocks like Apple Inc. (AAPL) and Microsoft (MSFT) are simultaneously represented in the DJIA, the S&P 500, and Nasdaq 100 with weightings as high as 11.2% of a single "market" index. This view of the stock market using overlapping 630 mega and large cap stocks out of over 17,000+ stocks gives a distorted perspective that many investors don't fully appreciate.

As a result I have also created the S&P 500 Momentum Gauges that have remained highly positive over the past month. These gauges only look at the mega/large cap index of the S&P 500 and very closely reflect the major market indices or roughly 3.7% of the stocks in the US market.

2. Why do you caution against buying MDA breakouts when the Momentum Gauges are highly elevated or negative?

Over four years of data show that when the Momentum Gauges are negative investors are much more risk averse, hold stocks for much shorter trading periods, exit stocks more aggressively, and increasingly avoid the riskier small cap stocks in the marketplace. I view the gauges as a type of measure of the broader investing "soil" and in negative conditions, the "soil" does not sustain momentum growth as well as when the conditions are highly positive. For example, last year we had 20 weeks with the Momentum Gauges negative. Not trading in those 20 weeks of bad market "soil" increased the annual 2020 MDA breakout returns from 73.4% in 52 weeks to +94.7% in 32 weeks representing an increase of over 21%.

No matter what the Momentum Gauge conditions show, I continue to release weekly MDA picks to further my research and see how I can enhance returns even in the worst market conditions. Readers should consider these factors closely as you contemplate your next weekly trades in any US traded stock. Unfortunately, we are heading into Week 16 with the Momentum Gauges® negative again, but the S&P 500 gauges highly positive, so please use caution with the high volatility MDA breakout picks.

3. How should I trade when the Momentum Gauges continue at high negative levels week after week?

At high negative Momentum Gauge conditions, the broad market has certain areas of significant weakness and danger to investors. I use additional gauges to locate strength and weakness in a diverging market. It is clear in the performance chart across market cap segments as well as the S&P 500 Momentum Gauges that money flows are moving to the fewer mega and large cap stocks over the past month.

In these conditions, members of my service are encouraged to follow the money flow to the 2021 Piotroski value portfolio +38.4% and Forensic value portfolios +17.2% and +20.0% as well as the large/mega cap MDA Growth & Dividend portfolios up +40.1% weighted average YTD gains:

However, when the Momentum Gauges, the S&P 500 Momentum Gauges, and the 11 Sector Momentum Gauges all turn negative this gives us the strongest signal to move to the safety of cash or inverse funds and out of the market. Many more years of detailed research on this model as well as independent member studies are available in the Members' Library.

Historical Performance Measurements

The MDA Breakout minimal buy/hold returns are at +44.35% YTD in 2021 when not trading in red weeks with negative Momentum Gauges signals. Remarkably, the frequency streak of 10% gainers within a 4- or 5-day trading week continues at highly statistically significant levels above 80% not counting frequent multiple 10%+ gainers in a single week.

Longer-term, many of these selections join the V&M Multibagger list now up to 203 weekly picks with over 100%+ gains, 92 picks over 200%+, 22 picks over 500%+ and 6 picks with over 1,000%+ gains since January 2019.

More than 200 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017. A frequency comparison chart is at the end of this article. Readers are cautioned that these are highly volatile stocks that may not be appropriate for achieving your long term investment goals: How to Achieve Optimal Asset Allocation.

2021 YTD Breakout Portfolio Returns

The Breakout Picks are high volatility selections for short-term gains, but with no selections below $2/share, under 100k average daily volume, or less than $100 million market cap. The 2020 MDA Breakout ended the year +73.4% with returns through Week 52. Prior return performance and helpful strategy information are available here in the 2020 and Q1 2021 articles:

For 2021 the maximal average weekly returns are +15.7% for total 250.8% YTD maximal returns. Using the buy/hold model not following the Momentum Gauges is delivering minimal average -0.46% weekly return for minimal returns -7.4% YTD. The S&P 500 average weekly return is +0.71% YTD.

These returns include trading against all the Negative Momentum Gauge signal warnings which increases your risk of declines, but are conducted without interruption for testing and measurement purposes.

The Weekly Momentum Gauges now include the Russell 2000 index and continue a negative signal from Week 12 through Week 16. This is our first negative period on the weekly chart since Week 45 of last year. The scaled S&P 500 continues higher in an unusually strong divergence from the negative weekly scores as the broader Russell 2000 remains weak. The Fed's stimulus activity is shown in dark blue from the SOMA holdings reports with $25.1 billion in easing in the past week.

(Source: VMBreakouts.com)

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 17 - 2021 Breakout Stocks for next week are:

The selections this week consist of 2 healthcare, 1 financial and 1 industrial sector stocks. These stocks are released to members in advance every Friday morning near the open and were also selected on the basis of positive momentum conditions of these sectors.

  1. Adicet Bio (ACET) - Healthcare / Biotechnology
  2. Controladora Vuela Compania de Aviacion (VLRS) - Industrials / Airlines

Adicet Bio - Healthcare / Biotechnology

Price Target: $18.00/share (See my FAQ #20 on price targets)

Apr-15-21 07:00AM Adicet Bio to Participate in the Canaccord Genuity 2021 Horizons in Oncology Virtual Conference GlobeNewswire
Apr-13-21 07:00AM Adicet Bio Appoints Dr. Blake Aftab as Vice President of Research GlobeNewswire
Mar-11-21 04:10PM Adicet Reports Fourth Quarter and Full Year 2020 Financial Results and Provides Business Update GlobeNewswire
Mar-10-21 07:00AM Adicet Bio Announces Initiation of its First-in-Human Phase 1 Trial of ADI-001 for the Treatment of B Cell Non-Hodgkin's Lymphoma PR Newswire
Mar-04-21 04:01PM Adicet Bio Appoints Dr. Andrew Sinclair to its Board of Directors GlobeNewswire

(Source: FinViz)

Adicet Bio, Inc., a biotechnology company, discovers and develops allogeneic gamma delta T cell therapies for cancer and other diseases. The company offers gamma delta T cells engineered with chimeric antigen receptors and T cell receptor-like antibodies to enhance selective tumor targeting, facilitate innate and adaptive anti-tumor immune response, and enhance persistence for durable activity in patients.

Source: Company resources

(Source: StockRover)

Controladora Vuela Compania de Aviacion - Industrials / Airlines

Price Target: $26.00/share (See my FAQ #20 on price targets)

Apr-22-21 11:31PM Volaris, the Lowest Cost Publicly Traded Airline in the Americas reports Strong Liquidity Position of Ps.8.7 billion as of March 31, 2021 PR Newswire
Apr-21-21 01:46PM Airline Stock Q1 Earnings Roster for Apr 22: LUV, AAL & More Zacks
Apr-20-21 07:33PM Volaris announces the addition of eight incremental A320 NEO aircraft in 2021 PR Newswire
Apr-14-21 06:25PM Volaris Announces Additional Liquidity Preservation Initiatives, US$ 100 Million Of Working Capital Relief PR Newswire

(Source: FinViz)

Controladora Vuela CompanA-a de Aviacion, S.A.B. de C.V. provides air transportation services for passengers, cargo, and mail in Mexico and internationally. As of December 31, 2019, the company operated a fleet of 82 aircraft. It operates approximately 131 daily flights on routes that connect 40 cities in Mexico and 25 cities in the United States and Central America.

Source: Company resources

(Source: StockRover)

Top Dow 30 Stocks to Watch for Week 17

Applying the same MDA breakout model parameters to only 30 stocks on the Dow Index 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. The most recent picks of weekly Dow selections in pairs for the last 5 weeks:

Symbol Company Current % return from selection Week
CAT Caterpillar, Inc. -1.39%
(CSCO) Cisco Systems -1.69%
(MMM) 3M Company +2.12%
(JPM) JPMorgan Chase & Co. -3.90%
(CRM) Salesforce.com +7.95%
(MSFT) Microsoft Corp. +8.90%
(CAT) Caterpillar, Inc. +1.71%
(CVX) Chevron Corp. -4.02%
(WBA) Walgreens Boots Alliance +0.91%
(AMGN) Amgen Inc. +4.51%

If you are looking for a much broader selection of mega-cap breakout stocks beyond just 30 Dow stocks with more detailed analysis and strong returns, I would recommend the Growth & Dividend MDA Breakout picks, released monthly for long term total return +40.1% avg. weighted monthly returns not including dividends all above 2%+ annually. Every portfolio is positive from inception in January 2020.

The Dow pick for next week is:

Salesforce.com

Salesforce has been upgraded as recently as Friday with multiple analysts rating it as Outperform with $260 to $270/share targets. Institutions are net buyers in the current quarter with earnings in May. Sentiment and technical indicators are all positive with increasing net MFI inflows and a break above the negative channel at 240/share would begin a positive new price channel.

Finviz Chart

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.

These documented high frequency gains in less than a week continue into 2020 at rates more than four times higher than the average stock market returns against comparable stocks with a minimum $2/share and $100 million market cap. The enhanced gains from further MDA research in 2020 are both larger and more frequent than in previous years in every category. ~ The 2020 MDA Breakout Report Card.

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)

The 2020 percentages of 208 MDA breakout stocks through 52 weeks of 2020 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. Penny stocks well below these minimum levels have been shown to benefit greatly from the model but introduce much more risk and may be distorted by inflows from readers selecting the same micro-cap stocks.

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 actively traded V&M Premium Portfolio ended 2020 up +47.48% through 52 weeks beating the S&P 500 consistently every year since inception. The Premium Portfolio gains were achieved despite 20 weeks moving to cash following the Momentum Gauge® signals and total returns do not include the additional large gains from ETF bear funds suggested during the negative signal weeks.

All the very best to you, stay safe and healthy and have a great week of trading!

JD Henning, PhD, MBA, CFE, CAMS

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Welcome! I am 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. I'm the founder of Value & Momentum Breakouts.

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I'm JD Henning, the founder of Value & Momentum Breakouts. I've spent decades studying how to get better returns in the market. I've earned degrees researching markets, and even more importantly, I've spent the time myself as a trader and investor.  I am one of those unusual multi-millionaire, PhD's in finance, former Coast Guard officer with a bunch of certifications ranging from anti-money laundering specialist, investment adviser, to fraud examiner...  who genuinely enjoys helping others do well in the markets.  I'm bringing the fruits of my experience and research to this service.  I am highly accessible to members to answer questions and give guidance.  

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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.

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