The NASDAQ Composite continues its remarkable ascent with a 1.8% gain for the week, better than the DJI but slightly behind the S&P 500. The index continues to track just within the outer Bollinger Band (2 standard deviations)  for the second week. The steepness of the climb is dizzying but by no means unprecedented since April 2009 when the market's recovery began. While we cannot say when a consolidation/correction will occur we can be sure there will be one. Be on your guard and watch our trend signals for the first sign that they are taking away the punch bowl. A reversal in a trend signal is not a signal to sell, but it is a warning not to open any new positions.

The NASDAQ's strength is producing some strong breakouts with three from a CwH pattern that gained well over 10%. NOAH has gained 27%, CCIX 24.8% and LRN 14%. Most breakouts in the last week are at or near their intraday highs. Note that all breakouts on this week's list are from a cup-with-handle pattern (CwH).

B'out Date	Symbol	Base	B'Out Price	Last Close	Current % off BOP	*Gain at Intraday High
5/10/2013	NOAH	CwH	9.12	11.59	27.08%	27.08%
5/10/2013	CCIX	CwH	15.27	19.05	24.75%	24.75%
5/10/2013	LRN	CwH	25.97	29.61	14.02%	14.02%
5/13/2013	LOV	CwH	8.24	8.92	8.25%	9.22%
5/13/2013	ALNY	CwH	25.88	27.44	6.03%	8.85%
5/10/2013	SWFT	CwH	15.48	16.84	8.79%	8.79%
5/13/2013	NLNK	CwH	15.61	16.68	6.85%	6.85%
5/14/2013	SEIC	CwH	29	30.53	5.28%	5.28%
5/10/2013	TZOO	CwH	27.71	28.62	3.28%	5.23%
5/13/2013	KERX	CwH	8.41	8.04	−4.40%	4.04%
5/14/2013	FIG	CwH	7.18	7.45	3.76%	4.04%
5/10/2013	BECN	CwH	39.21	40.76	3.95%	3.95%
5/14/2013	RLD	CwH	14.99	15.55	3.74%	3.74%
5/14/2013	ZOLT	CwH	13.48	12.83	−4.82%	2.82%
5/14/2013	GTY	CwH	22.36	22.55	0.85%	1.52%
5/14/2013	PLAB	CwH	7.93	7.54	−4.92%	0.13%

 

No new features this week.

Two weeks ago, I suggested that if you bought an alert on breakout, then you should hold it provided the day's volume reached at least the 50 day average volume level. I repeated the analysis over the weekend and found no reason to change that suggestion under current market conditions (note that this deviates from our longstanding recommendation of 2.25 times adv, due to the exceptionally strong market this year).

I also performed the analysis for stocks that could be bought at next day's open and found that once again, if the stock closed above its breakout price an volume equal to or greater than the 50 day adv, then the stock could be bought. BUT, a tighter trailing stop of 2% instead of 3% should be used. this suggestion is based on this year's market conditions and will definitely be subject to change in the future.

Our CwH backtest tool shows that using a buy at open strategy with a stop loss of 2% could have earned 20.5%.