Last week we identified a resistance level for the NASDAQ Composite at 1789 which it comfortably passed as soon as Monday to close the week at 1792.8. The weekly chart shows there has been only one negative week for the index since March 9. Note that the On Balance Volume (overlaid on the weekly chart below) has been steadily climbing since March 9 also. This is an indication that as confidence grows, more and more money is coming from the sidelines to participate in the market rally. Another encouraging sign is that the 50 dma has now risen above the 200 dma.

This was an exceptionally good week for breakouts with 22 breakouts making an average of over 8% by Friday's close. The standout performer was Kenexa Corp. (KNXA) which soared over 34% intraday after breaking out from a High Tight Flag pattern and closed 27.5% above its breakout price.

We are really excited about the Zacks Strong Buy watchlist and its money-making potential and added several new features this week:

1. There is now a real-time alert monitor so you can catch these stocks as they break out, even if you don't have access to the email alerts.
2. There is also a 'Buy and Sell Alert History' which shows alert status as of the end of each session. This display also shows the breakout status of any buy alerts issued. The display also shows when a stock on which we issued an alert lost its Strong Buy ranking. This is checked for each stock each day.
3. In addition to breakout alerts, we are also sending sell alerts when either the breakout attempt is not confirmed, or the stock loses its Strong Buy rating.

You must be a Zacks subscriber to access the Zacks Strong Buy watchlist and associated reports and alerts.. You can get a 30-day free trial from Zacks Investment Research by clicking the Zacks logo:

We also improved the Strong Buy Strategy Simulator in two ways this week:

1. We updated the backtest database to include data through to June 1 of this year
2. We added an additional option to sell at next open if a breakout alert is unconfirmed (see below for a discussion of this).

Revised Zacks Strong Buy Strategy Yields 117% Compound Annual Return

Following an enquiry from a subscriber we analyzed the impact of selling an unconfirmed breakout attempt at the open of the next session as an alternative to selling when it lost its Strong Buy rating or hit a pre-set stop loss percent. We found this made a dramatic improvement to the already very impressive results.

For example, using a 5 position limit and a 5% stop loss for cup-with-handle breakouts, the return over the length of our backtest improved from a compound annual return of 83.6% to 97.8%. At the same time the maximum drawdown over the length of the backtest dropped from 13.6% to 7.3%. The results summary for the two options is shown in the table below..

Impressive though the new result is, we also looked at the optimum position size and stop loss using the new sell at open if breakout unconfirmed option. We found four (4) positions and a stop-loss of 4% gave the best reward to risk ratio over the period of the backtest. These options gave a 117.1% compound annual return from January 2004 to June 1, 2009. We have updated our white paper describing the revised strategy and the results.