BreakoutWatch.com Weekly Review

You are receiving this email because you are or were a BreakoutWatch.com subscriber, or have subscribed to our weekly newsletter. This newsletter summarizes the breakout events of the week and provides additional guidance that does not fit into our daily format. It is published each weekend.

Market Summary

Weekly Breakout Report

Top Breakout Choices

Top 2nd Chances

New Features

Tip of the Week

Prior editions of this newsletter with our valuable Tips of the Week are available here.

Weekly Commentary

Despite mostly upbeat third quarter earnings, the S&P 500, NASDAQ Composite and Russell 2000 came under distribution this week as investors took profits.

Bloomberg reports that "All but 20 of the 138 companies in the S&P 500 that reported third-quarter results this week beat the average analyst estimate, including Apple Inc., Caterpillar Inc. and Morgan Stanley ... Since the start of the third-quarter earnings season, 80 percent of the companies in the S&P 500 that released results have reported better-than-estimated profits ...There’s not a higher proportion in data going back to 1993. "

It seems that investors have a hard time believing in the reality of the recovery, even though there is evidence that we are already out of recession and that earnings will continue to improve. The weekly chart of the NASDAQ composite shows the indecision present in the market as the 'DOJI' candlestick reappears as it has so often this year. Usually, the uncertainty has resolved itself to the upside and we expect the same result this time because of our position in the economic cycle.

NASDAQ Weekly

New Features this Week

Additional Value that we added this week

We added a performance report for the High Tight Flag pattern. It is accessed under Monitor > Performance > High Tight Flag

This Week's Top Tip

Tips for getting the most out of our site

In our 9/18/2009 newsletter we highlighted the superior performance of the high tight flag (HTF) pattern over the cup-with-handle (CwH). The introduction of the HTF performance report this week gives us another opportunity to emphasize how well breakouts from this pattern perform.

The histograms below are drawn from the performance reports for the HTF and CwH patterns. For each pattern, the upper chart shows the number of breakouts since January 1, 2008 that achieved maximum gains in the groupings shown, while the lower chart shows the percentage of breakouts that fell within each grouping.

The histograms clearly show the that the gains are skewed to the higher end of the gain ranges in the case of the HTF breakouts.

While there has been an exceptional number of HTF patterns this year because of the rapid recovery since March, the same conditions have produced a high number of CwH patterns. The comparison shows that given the choice of investing in a CwH breakout or a HTF breakout, the HTF is the wiser choice.

High Tight Flag Performance	Cup-with-Handle Performance

Market Summary

Overview of market direction and industry rotation

Index

Value

Change Week

Change YTD

Trend

Dow

9972.18

-0.24%

13.63%

Down

NASDAQ

2154.47

-0.11%

36.62%

S&P 500

1079.6

-0.74%

19.52%

Russell 2000

600.86

-2.49%

20.3%

Wilshire 5000

11117.5

-0.91%

22.34%

1 Week	13 Weeks	26 Weeks	Year-to-Date
Best Performing Index
NASDAQ Composite -0.11 %	Wilshire 5000 9.59 %	NASDAQ Composite 27.16 %	NASDAQ Composite 36.62 %
Best Performing Industry (by average technical score over each period)
1 Week	3 Weeks	13 Weeks	26 Weeks
Publishing - Newspapers	Publishing - Newspapers	Copper	Auto Parts Stores
Most Improved Industry (by change in technical rank²)
Aluminum + 54	Aluminum + 99	Long Distance Carriers + 213	Long Distance Carriers + 210
Charts of each industry rank and performance over 12 months are available on the site

¹The Market Signal is derived from our proprietary market model. The market model is described on the site.
²The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.

Weekly Breakout Report

How confirmed breakouts performed this week

# of Breakouts		Period Average¹	Max. Gain During Period²	Gain at Period Close³
This Week	10	12.08	5.76%	1.77%
Last Week	8	13.23	7.23%	-2.39%
13 Weeks	166	13.77	20.32%	5.85%

¹The average number of breakouts in each week over the previous 13 weeks.
²This represents the return if each stock were bought at its breakout price and sold at its intraday high.
³This represents the return if each stock were bought at its breakout price and sold at the most recent close.

Top Breakout Choices

Stocks on our Cup-and-Handle list with best expected gain if they breakout