Week 42 MDA Breakout Stocks - October 2021: Short-Term Picks To Give You An Edge

Oct. 17, 2021 4:10 AM ETANY, CRM, CVX, DIS, DOW, GS, GS.PA, GS.PC, GS.PD, GS.PJ, IBM, INTC, JPM, JPM.PC, JPM.PK, JPM.PL, MCD, TRUE2 Comments4 Likes

Summary

  • Two new Breakout Stocks for Week 42 with better than 10% short-term upside potential. The ETF/ETN forecast section now goes out in a separate article.
  • Following the Momentum Gauges, the portfolio is up +74.4% YTD with a record high 23 weeks out of 41 weeks this year in negative conditions above the 40 MG level.
  • This past week, 1 out of 4 stocks gained over +10% peak gains, led by EXK +10.7%, but HMY and MGY peaked at +9.5% and +9.8%, respectively.
  • The streak of weekly picks gaining over 10% in less than a week of trading days continues to 192 out of 230 trading weeks (83.4%), not counting multiple gainers.
  • The MDA breakout picks completed 2020 up +73.4%, beating the S&P 500 for the 4th consecutive year with average annual returns of +43.8%. The cumulative 5-year return is at 726.0% to date.
  • This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Learn More »

Armada of Tall Ships Sails at Morning

JamesBrey/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 over 230 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 since 2020, I now generate 4 selections each week, 2 Dow 30 picks, and separate articles for ETF/ETNs and monthly Growth & Dividend MDA breakout stocks. I 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: Value And Momentum Breakouts For 2021: 10 Models To Beat The S&P 500, Again.

Returns from 18 Weeks of Positive Momentum Gauge signals YTD

Momentum Gauge trading signal: POSITIVE signal ahead of Week 42

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

Historical Performance Measurements

The MDA Breakout minimal buy/hold returns are at +74.4% YTD when trading only in the positive weeks consistent with the positive 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. The cumulative 5-year return is at 726.0% through Week 41 of October 2021.

Longer-term, many of these selections join the V&M Multibagger list, now up to 203 weekly picks with over 100%+ gains, 97 picks over 200%+, 29 picks over 500%+, and 9 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 is documented here:

For 2021, the maximal average weekly returns are +10.95% for total 448.9% YTD maximal returns. Using the blind buy/hold approach and not following the Momentum Gauges is delivering minimal average -0.40% weekly return. The S&P 500 average weekly return is +0.46% 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.

Market Momentum Conditions

The Momentum Gauges closed at Negative 47 and Positive 96 in positive conditions above equilibrium but with the negative values still above 40. The green/red arrows show the new early test signal after 3 consecutive declines on the negative gauge values. The blue area shows the region of uncertainty that typically starts a change in signal. The Momentum Gauges have correctly called every major market direction change since measurements began.

(Source: VMBreakouts.com)

The Weekly Momentum Gauges based on the broad 7,500+ stocks continue positively for a third consecutive week very near equilibrium levels. Like the Daily Momentum Gauges, this smoothed long-term chart correlates best with the much broader Russell 2000 index. The Fed's stimulus activity is shown in dark blue from the SOMA domestic holdings reports with a $16.4 billion increase in domestic security purchases this week. This is still consistent with $120 billion monthly Fed stimulus promised through 2021.(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 40 on the gauge.

The Week 42 - 2021 Breakout Stocks for next week are:

The picks consist of 2 Technology, 1 Consumer Cyclical and 1 Communication Services sector stocks. These stocks are released to members in advance every Friday morning near the open. Prior selections may be doing well, but for research purposes, I deliberately do not duplicate selections from the prior week. These selections are in anticipation of a rotation back to Tech/Internet stocks after strong declines and a new breakout pattern on the Nasdaq 100 and improving Sector Momentum Gauges showing increasing net inflows.

  1. Sphere 3D Corp. (ANY) - Technology / Software - Application
  2. TrueCar Inc. (TRUE) - Communication Services / Internet Content

Sphere 3D Corp. - Technology / Software - Application

** ANY is a strong short squeeze candidate with a high 57.2% short float but unusually high net institutional buying in the most recent quarter. A great combination for a squeeze that could be very significant: Sphere 3D Corp. Common Shares Institutional Holdings.

Price Target: $12.00/share (See my FAQ #20 on price targets)

Oct-13-21 09:00AM Why Bitcoin-Related Stock Sphere 3D Is Rising Today Benzinga
Oct-13-21 07:00AM Sphere 3D and Gryphon Secure Largest Single Hosting Services Deal in Core Scientific's History Newsfile
Oct-06-21 12:32PM You Ask, We Analyze: How Sphere 3D, Warrior Met Coal, United Natural Foods Stocks Look Going Forward Benzinga
Sep-29-21 09:12AM Infrastructure package is invaluable to our country': Suzanne Shank Yahoo Finance Video
Sep-25-21 10:06AM 15 Best Short Squeeze Stocks To Buy Now Insider Monkey

(Source: FinViz)

Sphere 3D Corp. provides data management and desktop and application virtualization solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. It enables organizations to deploy a combination of public, private, or hybrid cloud strategies through containerized applications, virtual desktops, virtual storage, and physical hyper-converged platforms. The company offers HVE converged and hyper-converged infrastructure solutions, such as HVE-STACK high-density server solution; HVE-VELOCITY high availability dual enclosure storage area network solution; and HVE 3DGFX, a virtualized desktop infrastructure solution.

(Source: StockRover)

TrueCar Inc. (TRUE) - Communication Services / Internet Content

Price Target: $5.20/share (See my FAQ #20 on price targets)

Sep-29-21 09:00AM TrueCar Forecasts Fifth Consecutive Month of Slowing Vehicle Sales Across the Industry for September 2021 PR Newswire
Sep-24-21 09:00AM TrueCar Launches Pre-Qualification Experience Powered by Capital One to Enhance the Car Shopping Journey PR Newswire
Sep-23-21 09:00AM TrueCar Shares Best Cash, Lease and Finance Deals on New Vehicles for September 2021 PR Newswire
Aug-30-21 08:00AM TrueCar to Participate in Upcoming Investor Conference PR Newswire
Aug-26-21 09:00AM TrueCar Forecasts Fourth Consecutive Month of Slowing Vehicle Sales for August 2021 PR Newswire

(Source: FinViz)

TrueCar, Inc. operates as an internet-based information, technology, and communication services company in the United States. It operates its platform on the TrueCar website and mobile applications. Its platform enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar certified dealers.

(Source: StockRover)

Top Dow 30 Stocks to Watch for Week 42

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
(CVX) Chevron Corp. +1.44%
(DOW) Dow Inc. +0.43%
(IBM) Intl Business Machines +2.84%
(CVX) Chevron Corp. +6.67%
(MCD) McDonald's Corporation -1.72%
(CRM) Salesforce +2.60%
(DIS) The Walt Disney Company -3.82%
(MCD) McDonald's Corporation -0.10%
(JPM) JPMorgan Chase +5.88%
(INTC) Intel Corp. +1.15%

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.

These picks are released monthly for long-term total return with all but 5 portfolios positive from inception. The +21.7% average weighted monthly returns do not include the large dividends above 2%+ for every stock.

The Dow pick for next week is:

Goldman Sachs (GS)

Goldman delivered very strong earnings results on October 15th with extremely favorable valuations of 7.4x earnings and 0.57x cash to support very strong gains in the coming quarter. Indicators all show early breakout conditions and strong positive investor sentiment with analyst targets as high as $450/share.

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.

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 maybe 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 10 quantitative models I publish from top financial research that include one-year buy/hold value stocks.

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 a beneficial long position in the shares of NRGU, GDXU, TQQQ, KOLD either through stock ownership, options, or other derivatives. 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.

Additional disclosure: I continue to follow the Market Momentum Gauge® and Sector Momentum Gauge® signals. I adjust my exposure ahead of weekends and holidays to minimize the risk from these high volatility 3x funds that may not be appropriate investments for your portfolio. Readers are highly encouraged to consider your own optimal asset allocation strategies to diversify risks and enhance returns.

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