Week 18 MDA Breakout Stocks - May 2022: Short-Term Picks To Give You An Edge

May 01, 2022 5:00 AM ETCAT, CELH, DOW, ENPH, GNK, IPI, JNJ, KO, MCD, MRK, PUMP, RES, TDW, TNRSF, TRIL, TS, TWI, UNH, WIRE, WMT2 Comments4 Likes

Summary

  • Two sample Breakout Stocks for Week 18 with better than 10% short-term upside potential and a Dow 30 pick. Average cumulative returns now up to +62.7% YTD.
  • High frequency breakouts continue despite negative Momentum Gauge® signals with peak gains in 1 of 4 picks above 10%: NNBR +10.53%.
  • All the V&M Portfolios are beating the S&P 500 YTD, led by the ETF portfolio +15.2%, Piotroski Value +7.1%, and Positive Forensic +5.6% YTD.
  • The streak of weekly picks gaining over 10% in less than a week of trading days increased to 210 out of 257 trading weeks (81.7%), not counting multiple gainers.
  • The MDA breakout picks continue to beat the S&P 500 into 6 consecutive years, delivering a CAGR +49.8% and 726.0% compounding returns through 2021. 2021 returns were +70.5%.
  • This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Learn More »

Lightning during summer storm

Slavica/E+ via Getty Images

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 7 years. This subset of the different portfolios I regularly analyze has now exceeded 250 weeks of public selections as part of this ongoing live forward-testing research. The frequency of 10%+ returns in a week is averaging over 4x the broad market averages over the past 5+ years.

In 2017, the sample size began with 12 stocks, then 8 stocks in 2018, and at members' request since 2020, I now generate only 4 selections each week. In addition, 2 Dow 30 picks are provided, as well as a new active ETF portfolio that competes against a signal ETF model. Monthly Growth & Dividend MDA breakout stocks continue to beat the market each year as well. I offer 11 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:

The cumulative average breakout returns for 2022 is up to +62.7% not using the gauge signal. Officially, for trading safety, there has only been one full week of a positive signal in 2022 with the 2nd worst start to the stock market since the global financial crisis. Despite record high negative momentum conditions all year, 43 picks in 17 weeks are beating the S&P 500. 29 picks are beating the S&P 500 by over 10% and as high as 126.8% (RES), +50.8% (IPI), +69.9% (TDW), +40.8% (PUMP), and +41.7% (GNK) significantly beating the major indices YTD.

VMBreakouts.com YTD return MDA picks

Value & Momentum Breakouts

Additional background, measurements, and high frequency breakout records on the Weekly MDA Breakout model is here: Value And Momentum MDA Breakouts +70.5% In 52 Weeks: Final 2021 Year End Report Card

Returns from 21 Weeks of Positive Momentum Gauge signals in 2021

Last year there were only 21 positive trading weeks to achieve +70.5% returns. For 2022 we have only had one official positive weekly signal on the Momentum Gauges® so far despite strong returns in many negative market weeks.

2021 MDA returns

Value & Momentum Breakouts

Momentum Gauge® trading signal: Negative conditions ahead of Week 18

Weekly return measurements have started for the 2nd quarter of 2022.

Weekly MDA returns

Value & Momentum Breakouts

Red weekly color indicates negative Market Momentum Gauge signals. MDA breakout selections tend to outperform when the market signal is positive and negative values are below 40 level. This was an especially strong factor in 2021 showing cumulative returns below with and without the signal.

Cumulative returns with / without signal above 40

Value & Momentum Breakouts

Historical Performance Measurements

Historical MDA Breakout minimal buy/hold returns are at +70.5% 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.

Longer term many of these selections join the V&M Multibagger list now up to 112 weekly picks with over 100%+ gains, 46 picks over 200%+, 19 picks over 500%+ and 8 picks with over 1000%+ gains since January 2019 such as:

  • Intrepid Potash (IPI) +2,145.8%
  • Houghton Mifflin Harcourt Company (HMHC) +1,413.8%
  • Enphase Energy (ENPH) +1,067.0%
  • Trillium Therapeutics (TRIL) +1008.7%
  • Celsius Holdings (CELH) +1,006.4%

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.

2022 Breakout Portfolio Returns

The Momentum Gauge® conditions continue with highly negative warning signals with only one full week of positive conditions in week 12 of 2022 with minimum returns of -1.0% following the signals and avoiding the 2nd worst quarter to start the year since the Global Financial Crisis.

The Breakout Picks are high volatility selections for high short-term gains, but with no selections below $2/share, under 100k average daily volume, or less than $100 million market cap. Prior returns are documented here:

2022 marks the worst start to the stock market since 2009 and the Momentum Gauge® MDA buy signals continue strongly negative ahead of next week. It is best to follow the signals and avoid momentum stocks until conditions turn positive.

Annual returns MDA portfolio

Value & Momentum Breakouts

Market Momentum Conditions

Why not avoid all the major market downturns? The Market Momentum Gauges® based on 7,500+ stocks continue negative this week at Negative 137 and Positive 18. The negative value continues above 40 warning level of adverse market conditions through 2022.

Momentum Gauge daily chart

Value & Momentum Breakouts App

The S&P 500 gauges continue highly negative again this week closing at Negative 46 and Positive 7. The S&P 500 has been the most resilient of the major indices but continues down -13.31% YTD.

The Weekly Momentum Gauges® continue negative with only three weeks positive in the past 23 weeks since November avoiding tremendous market declines. The Weekly chart below includes the 2020 Covid Correction.

Momentum Gauge weekly chart

Value & Momentum Breakouts App

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 18 - 2022 Breakout Stocks for next week are:

The picks for next week consist of 1 Technology, 1 Basic Materials, 1 Energy, 1 Industrials 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 based on MDA characteristics from my research, including strong money flows, positive sentiment, and strong fundamentals -- but readers are cautioned to follow the Momentum Gauges® for the best results.

  1. Tenaris S.A. (TS) - Energy / Oil & Gas Equipment & Services
  2. Encore Wire Corp. (WIRE) - Industrials / Electrical Equipment

Tenaris S.A. - Energy / Oil & Gas Equipment & Services

TS Chart

FINVIZ

Price Target: $36.00/share (See my FAQ #20 on price targets)

Apr-27-22 04:47PM Tenaris Announces 2022 First Quarter Results GlobeNewswire
Apr-26-22 09:55AM Tenaris S.A. Could Find Support Soon, Here's Why You Should Buy the Stock Now Zacks
Mar-31-22 11:50AM Tenaris Files 2021 Annual Report, 2021 Sustainability Report and 2021 Annual Report on Form 20-F, and Convenes Annual General Meeting of Shareholders GlobeNewswire
Mar-17-22 11:01AM Titan International Up 31% YTD: What's Driving the Rally? Zacks
Mar-16-22 02:14PM Analysts Are Upgrading These 10 Value Stocks Insider Monkey
Mar-15-22 12:00PM Tenaris S.A. is a Great Momentum Stock: Should You Buy? Zacks

(Source: FINVIZ)

Tenaris S.A., through its subsidiaries, produces and sells seamless and welded steel tubular products; and provides related services for the oil and gas industry, and other industrial applications. The company offers steel casings, tubing products, mechanical and structural pipes, cold-drawn pipes, and premium joints and couplings; coiled tubing products for oil and gas drilling and workovers, and subsea pipelines; and umbilical tubing products; and tubular accessories.

Source: Company resources

TS Stock Rover data

Stock Rover

Encore Wire Corp. - Industrials / Electrical Equipment

WIRE chart

FINVIZ

Price Target: $130.00/share (See my FAQ #20 on price targets)

Apr-28-22 05:05PM Encore Wire Reports First Quarter Results; Continued Strong Gross Profit Margins; Highlights Share Repurchases During Quarter Business Wire
Apr-25-22 11:14AM Encore Wire to Post Q1 Earnings: What's in the Cards? Zacks
Apr-21-22 10:25AM Is Weakness In Encore Wire Corporation Stock A Sign That The Market Could be Wrong Given Its Strong Financial Prospects? Simply Wall St.
Apr-20-22 05:05PM Encore Wire Announces Earnings Release Date and Conference Call Details Business Wire

(Source: FINVIZ)

Encore Wire Corporation manufactures and sells electrical building wires and cables for interior electrical wiring in the United States. Its products include NM-B cables for use as interior wiring in homes, apartments, and manufactured housing; THHN/THWN-2 cables and metal-clad and armored cables for use as wiring in commercial and industrial buildings; UF-B cables; XHHW-2 cables; RHH/RHW-2 cables; USE-2 cables; and other types of wire products.

Source: Company resources

WIRE Stock Rover data

Stock Rover

Top Dow 30 Stocks to Watch for Week 18

First, be sure to follow the Momentum Gauges® when applying the same MDA breakout model parameters to only 30 stocks on the Dow Index. Second, these selections are made without regard to market cap or the below-average volatility typical of mega-cap stocks that may produce good 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
(WMT) Walmart -2.53%
DOW Dow Inc. -2.92%
(DOW) Dow Inc. -2.70%
(CAT) Caterpillar -4.93%
CVX Chevron Corporation -7.73%
(UNH) UnitedHealth Group -6.03%
KO Coca Cola Company +3.76%
(MCD) McDonald's Corp +0.61%
(KO) Coca Cola Company +5.49%
(JNJ) Johnson & Johnson +2.30%

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 selections are significantly outperforming major hedge funds and all the hedge fund averages since inception. Consider the actively managed ARK Innovation fund down -50.17% YTD.

These picks are released monthly for long term total return with strong returns that are leading the S&P 500 by +13.0% through 2022. The March selections are heavy in energy up +6.8% and the new April picks are heavy in undervalued financial stocks for long term gains. All the major market indices remain negative YTD and the 2-year returns of monthly portfolios are also shown below not including returns from large dividends over +2% for each stock:

Growth & Dividend picks 1 year

Value & Momentum Breakouts

Growth & Dividend 2 year returns

Value & Momentum Breakouts

The Dow pick for next week is:

Merck & Co. (MRK)

Merck is in strong breakout conditions despite the large market selloff and negative Momentum Gauge® warning signals. Q1 earnings beat and indicators turned sharply positive with high net MFI inflows. Price is testing key $90/share resistance for potential breakout to all-time highs.

Finviz Chart MRK

FINVIZ

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.

MDA Frequency pick returns

Value & Momentum Breakouts

The 2021 and 2020 breakout percentages with 4 stocks selected each week.

MDA high frequency returns 2021 and 2020

Value & Momentum Breakouts

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 also include one-year buy/hold value stocks. Remember to follow the Momentum Gauges® in your investing decisions for the best results.

All the V&M portfolio models are beating the market indices in the worst downturn since the Global Financial Crisis. The new active ETF portfolio is up +15.22% YTD beating the S&P 500 by over 28.5% and value portfolios of Piotroski-Graham picks are up +7.1% through one of the worst starts in stock market history. The Top ETF returns following the Momentum Gauge® signal from the April 21 negative daily signal are over +29%

YTD Portfolio returns

Value & Momentum Breakouts

The final 2021 returns for the different portfolio models from January of last year are shown below.

2021 VM Breakout portfolio returns

Value & Momentum Breakouts

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 stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

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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