The expected correction to the NASDAQ came a week or two early as we had expected it to test its 2007 high before retreating. The weekly chart shows that the 2.4% loss for the week is the biggest weekly loss since August 14, 2009 when the index gave up 5%.



Volume for the week was below the 50 day (10 week) average indicating that, at least for now, this is a mild correction. The index closed the week at 2689.5. The lower trend line is at 2670 and a fall below that level could indicate that a more serious correction down to the outer Bollinger Band at 2640 is likely.

The number of breakouts fell to 9 from 17 last week reflecting the correction. While a fall in breakouts may seem disappointing, that is actually good as fewer breakouts means less potential for exposure to a downward trend.

In contrast, there were 31 breakdowns with an average loss since breakdown of 3.4%. In the table below, SS refers to breakdowns from the "Short Sale" (or 50 dma breakdown) pattern which identifies stocks falling below their 50 day moving average, and HS refers to breakdowns from a Head and Shoulders Top pattern. FB refers to a Flat Base pattern.

Breakdown Date	Symbol	Pattern	Loss since Breakdown
1/19/2011	IOC	SS	11.20%
1/19/2011	BID	HS	7.20%
1/19/2011	WDC	HS	6.80%
1/20/2011	IOC	SS	6.60%
1/19/2011	TC	HS	6.40%
1/19/2011	MEA	HS	6.00%
1/19/2011	DRIV	SS	5.50%
1/18/2011	MMR	SS	5.30%
1/19/2011	DRYS	HS	4.60%
1/19/2011	SM	HS	4.60%
1/20/2011	CIG	HS	4.30%
1/20/2011	GRS	HS	4.30%
1/20/2011	CTXS	SS	3.90%
1/20/2011	SCCO	HS	3.70%
1/19/2011	AOL	HS	3.60%
1/20/2011	TTWO	HS	3.50%
1/19/2011	ARCC	SS	3.10%
1/20/2011	ITMN	HS	2.90%
1/20/2011	RDN	SS	2.70%
1/20/2011	TSO	HS	2.50%
1/20/2011	PMI	SS	2.20%
1/21/2011	NG	HS	2.20%
1/21/2011	LYV	HS	1.60%
1/20/2011	GPX	FB	1.50%
1/21/2011	EWZ	HS	0.90%
1/19/2011	CCL	HS	0.60%
1/20/2011	ARCC	SS	0.60%
1/21/2011	BPO	SS	0.30%
1/21/2011	EIX	FB	-0.10%
1/18/2011	AHT	HS	-0.80%
1/19/2011	EBAY	HS	-2.00%
Average loss since Breakdown			3.41%

No new features this week.

Short Sales in Focus

With the number of breakdowns increasing and the possibility of a correction ahead, you may wish to consider persuing some short sale opportunities.

We offer two watchlists that identify potential short sale candidates:

• 50 DMA Breakdown (also called Short Sale)

• Head and Shoulders Top

Breakdowns can also occur from a Flat Base pattern although we do not specifically identify that as a short sale pattern as breakouts can go in both directions from a flat base.