Breakoutwatch Weekly Summary 03/24/18

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.

Contents
New Features this Week
Strategy Suggestions
Breakouts Summary
Breakouts Detail 		Top Cup and Handle Chart Pattern Stocks
Breakouts Index
Best Performing Index
Best Performing Industry
Most Improved Industry

Weekly Commentary
Market Trend Signals Turn Negative

Rocked by trade tariffs, Facebook revelations, an interest rate hike by the Fed and apparant chaos in the White House, the major indexes dropped sharply again this week.The trend signals for the DJI and S&P 500 turned negative on Wednesday and the NASDAQ followed suit on Thursday. Tech stocks were the biggest sufferers and the the NASDAQ led the indexes with a 6.54% loss. The rate of losses on the NASDAQ accelerated from Wednesday as declines increased and so did volumes. Losses have not yet reached their early February levels but support could be tested at 6630. With steel and aluminum tariff policy announcements causing concern and then being moderated it is difficult to know if the new China tarrifs are just a negotiating gambit also. A more hawkish foreign policy could also continue to upset the markets.

Breakouts were overall left in negative territory although some made significant gains. Despite the possibility that some stocks will do well, even in a downward trending market, the level of risk has increased substantially.

NASDAQ Chart

New Features this Week
Sell Strategy Added to Cup-and-Handle Backtest

Sell StrategyFollowing on from the introduction last week of the Trailing Stop Calculator tool I've added an option the CwH backtest tool to allow backtesting using eirthr a fixed trailing stop percentage or to use the upper Average Trading Range band as the trailing stop. In a volatile market, this seems to provide a better result as it takes the guesswork out of deciding what trailing stop percentage to use. As shown in the image to the right, you can choose a Sell Strategy of "Trailing Stop Percent" or "Upper ATR".
Strategy Suggestions

Use Average True Range to Improve Profits

Introduction

During 2017, the daily trading range of the S&P 500 was around 2%. I found, through back testing of the cup-and-handle breakout stocks, that a trailing stop of 3% gave very good average returns during that time. However, now that volatility has increased sharply, a 3% trailing stop is likely to cause one to exit a position too soon and be sub-optimal as the stock could quickly rise again and what could have been a winning position has been turned into a losing one. Which leads to the question of what trailing stop value is appropriate in 2018?

Volatility, as the term implies, waxes and wanes. It not only applies to the major indexes but also to individual stocks. The optimum trailing stop value during high volatility will be looser than during a period of low volatility, and what is appropriate for one stock that is experiencing high volatility will not be optimum for another experiencing low volatility. What we need is a method for calculating a trailing stop value suitable to the volatility of each individual stock. I am proposing that the Average True Range indicator could be the tool we need.

Average True Range

The true range concept was introduced by commodities trader Welles Wilder. I wont describe the calculation here as you can read about it in Wikipedia. The Average True Range (ATR) is a moving average calculated over 'n' days. For our calculation we are using n=14 days, although I may change that if I find a shorter period gives better results. I have added an ATR band to our technical charting tool. It is explained in this newsletter. Here's an example of applying the ATR band to Whiting Petroleum Corporation (WLL) which broke out on 3/21/2018.  If we were to use the upper ATR band as a trailing stop for the next day's trading (3/26/18) then we use a value of 32.14 which is the value of the upper ATR band on 3/23/18.

WLL Breakout


Does ATR provide a better trailing stop Indicator then a percentage?

As I remarked above, a 3% trailing stop worked well in the low volatility environment of 2017. But what value should we use now volatility has increased? The beauty of using ATR is that we don't have to guess as the ATR value is adjusted each day and for each stock. To illustrate this I ran the backtest for 2018 using parameters designed to include a large number of breakouts in the backtest for both the 2017 trailing stop value of 3% and for the upper ATR value as a trailing stop. The parameters for stock selection were identical in both cases.

Backtest 2018 using 3% Trailing stop

For the period 01/01/2018 to 03/23/2018, the backtest gave a profit of 25.41% with 7 winning trades and 10 losing trades. The average win per winning trade was 8.31%

WLL Trailing Stop
(click to enlarge)

Backtest 2018 using Upper ATR Band

For the period 01/01/2018 to 03/23/2018, the backtest gave a profit of 45.16% with 10 winning trades and 7 losing trades. The average win per winning trade was 8.68%

WLL trailing stop
(click to enlarge)

Conclusion

For the parameters chosen, using ATR was clearly the winner with almost double the profit of using a 3% trailing stop. It can be argued that the 3% trailing stop is too low and a higher value would have returned a better result. However, without running the backtest for several values we can't know (I didn't have the time before publishing this article to do so) and even if we did, would it be the optimum value for the next week, month or year. The value of using the ATR value is that it adjusts automatically for each stock and its individual volatility.
Breakouts Summary by Watchlist for Week Beginning 03/19/18
List Breakouts Avg. Gain
CWH 41 -3.66
SQZ 49 -1.1
HTF
0
HSB
0
DB 6 -2.92
Breakouts Detail for Week Beginning 03/19/18
Brkout Date Symbol Base Squeeze BrkoutOut Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
2018-03-19 GPRK SQZ y 10.22 10.83 86 12.08 18.2% 16.05%
2018-03-20 GPRK SQZ y 10.84 11.5 90 12.08 11.44% 9.41%
2018-03-20 WLL CWH n 30.27 30.66 82 33.62 11.07% 9.28%
2018-03-20 DVAX SQZ y 16.71 17.45 94 18.5 10.71% 10.59%
2018-03-20 SRI CWH n 25.04 28.79 87 26.89 7.39% 13.82%
2018-03-19 ZUMZ SQZ y 22.11 23.4 87 23.55 6.51% 6.78%
2018-03-21 DVAX SQZ y 17.46 18.4 94 18.5 5.96% 5.84%
2018-03-20 QDEL CWH n 49.63 49.8 94 51.03 2.82% -0.22%
2018-03-21 EC SQZ y 18.56 19.38 96 19.06 2.69% 0.11%
2018-03-20 MPC CWH n 69.43 71.46 83 71.28 2.66% 3.86%
2018-03-20 MOMO CWH n 37.98 38.76 80 38.9 2.42% 1.08%
2018-03-19 TGLS SQZ y 9.40 9.54 81 9.56 1.7% 1.49%
2018-03-21 STO SQZ y 23.08 23.7 84 23.33 1.08% 0.3%
2018-03-22 SPSC CWH n 64.20 64.65 80 64.65 0.7% -1.85%
2018-03-19 ECHO SQZ y 27.56 27.6 85 27.7 0.51% -0.11%
2018-03-22 DVAX SQZ y 18.41 18.5 95 18.5 0.49% 0.38%
2018-03-21 RLH SQZ y 10.01 10.25 87 10.05 0.4% 2.4%
2018-03-20 ECHO SQZ y 27.61 27.65 85 27.7 0.33% -0.29%
2018-03-19 DPS SQZ y 117.61 118.36 85 117.95 0.29% 0.11%
2018-03-20 EBS CWH n 52.84 53.75 92 52.95 0.21% 1.72%
2018-03-21 TDG DB n 302.22 309.34 83 302.8 0.19% 1.51%
2018-03-19 TDG DB y 302.22 302.5 78 302.8 0.19% 1.51%
2018-03-20 TDG DB n 302.22 308.14 80 302.8 0.19% 1.51%
2018-03-21 ECHO SQZ y 27.66 28.05 85 27.7 0.14% -0.47%
2018-03-23 FANG SQZ y 127.79 127.96 84 127.96 0.13% -0.13%
2018-03-19 DST SQZ y 83.42 83.57 92 83.3 -0.14% -0%
2018-03-22 MOV SQZ y 32.06 32.25 80 31.95 -0.34% -0.5%
2018-03-20 DPS SQZ y 118.37 118.4 86 117.95 -0.35% -0.53%
2018-03-20 NRT SQZ y 8.42 8.54 88 8.39 -0.36% -1.07%
2018-03-20 SUPN CWH n 44.62 45.35 84 44.45 -0.38% -1.52%
2018-03-21 IIN SQZ y 19.61 20.05 96 19.5 -0.56% -1.84%
2018-03-19 BBX CWH n 9.21 9.22 85 9.15 -0.65% -0.11%
2018-03-19 ENTG CWH n 36.25 36.5 89 35.85 -1.1% 1.24%
2018-03-22 ECHO SQZ y 28.06 28.3 87 27.7 -1.28% -1.89%
2018-03-21 FOXA SQZ y 36.70 36.86 82 36.12 -1.58% -0.27%
2018-03-20 SSNC CWH n 52.49 52.68 90 51.55 -1.79% -0.08%
2018-03-20 RFP SQZ y 8.51 8.65 92 8.35 -1.88% 2.82%
2018-03-19 VNET SQZ y 7.85 8.05 84 7.69 -2.04% -0.25%
2018-03-22 RLH SQZ y 10.26 10.3 87 10.05 -2.05% -0.1%
2018-03-21 BAP SQZ y 222.40 223.48 80 217.72 -2.1% -2.43%
2018-03-21 WOOD CWH n 78.25 78.97 82 76.45 -2.3% 0.17%
2018-03-22 TREX SQZ y 110.82 111.41 88 108.25 -2.32% -0.76%
2018-03-21 ICFI CWH n 61.25 61.4 86 59.75 -2.45% -0.49%
2018-03-21 NUS CWH y 73.72 74.35 81 71.84 -2.55% -0.91%
2018-03-19 ODFL CWH n 147.53 147.87 91 143.74 -2.57% 1.1%
2018-03-21 BCH SQZ y 101.39 101.42 81 98.75 -2.6% -0.84%
2018-03-21 DATA SQZ y 83.60 84.1 88 81.41 -2.62% -0.41%
2018-03-19 FAF SQZ y 59.47 60.32 84 57.8 -2.81% 1.09%
2018-03-21 CEO DB n 150.79 152.86 82 145.74 -3.35% -1.45%
2018-03-19 BKI SQZ y 48.71 48.8 99 47.05 -3.41% -0.74%
2018-03-21 VLO SQZ y 94.48 95.45 85 91.22 -3.45% 0.01%
2018-03-21 BOOM CWH n 27.25 27.55 96 26.3 -3.49% -1.65%
2018-03-19 TDY SQZ y 190.56 190.69 83 183.89 -3.5% 0.2%
2018-03-20 RICK SQZ y 28.56 28.93 84 27.56 -3.5% -0%
2018-03-20 TDY SQZ y 190.70 192.5 84 183.89 -3.57% 0.13%
2018-03-20 PCTY CWH n 54.13 54.82 80 52.18 -3.6% 1.33%
2018-03-21 TRU SQZ y 59.17 59.21 86 57.01 -3.65% -0.27%
2018-03-21 CUB CWH n 65.20 65.5 84 62.8 -3.68% -0.61%
2018-03-19 TBBK SQZ y 11.00 11.17 93 10.59 -3.73% 0.73%
2018-03-21 GNK CWH n 15.25 15.51 86 14.67 -3.8% -0.85%
2018-03-20 NVMI SQZ y 28.50 28.9 82 27.41 -3.82% 0.98%
2018-03-20 CNCE SQZ y 23.22 23.28 85 22.32 -3.88% -0.73%
2018-03-21 PJT SQZ y 49.60 49.85 84 47.67 -3.89% -1.07%
2018-03-19 RCKY CWH n 21.70 21.95 93 20.85 -3.92% -1.61%
2018-03-21 FLR SQZ y 57.19 58.3 82 54.85 -4.09% -0.23%
2018-03-21 ON CWH n 26.30 26.5 93 25.04 -4.79% -1.14%
2018-03-20 FLT CWH n 208.24 208.29 85 198.23 -4.81% 0.06%
2018-03-21 FLT SQZ y 208.30 208.64 86 198.23 -4.83% 0.03%
2018-03-20 V SQZ y 123.22 124.91 82 117 -5.05% 0.06%
2018-03-20 TBBK SQZ y 11.18 11.19 93 10.59 -5.28% -0.89%
2018-03-21 PFBC CWH n 66.18 66.26 80 62.68 -5.29% -0.76%
2018-03-22 CNCE SQZ y 23.61 23.84 88 22.32 -5.46% -2.37%
2018-03-20 SEIC CWH n 76.89 77.11 86 72.61 -5.57% 0.14%
2018-03-20 HDP CWH n 20.58 20.66 89 19.43 -5.59% -1.02%
2018-03-20 PGJ CWH n 49.80 49.83 82 46.93 -5.76% -0.24%
2018-03-21 IDTI CWH n 32.77 33.21 80 30.8 -6.01% -0.73%
2018-03-21 ASML CWH n 212.75 213.73 92 199.11 -6.41% -0.19%
2018-03-21 URI CWH n 186.11 187.27 91 174.18 -6.41% -0.86%
2018-03-21 OSBC CWH n 14.70 14.75 81 13.75 -6.46% -2.38%
2018-03-21 KELYA CWH n 30.71 30.91 84 28.68 -6.61% -1.5%
2018-03-21 XLRN SQZ y 42.21 43.53 84 39.39 -6.68% -2.46%
2018-03-20 EDU DB y 96.73 97.04 82 89.92 -7.04% -2.41%
2018-03-20 PATK SQZ y 66.16 67.35 81 61.5 -7.04% -0.39%
2018-03-21 STM CWH n 24.43 24.97 89 22.66 -7.25% 1.23%
2018-03-21 TER CWH n 49.27 49.5 90 45.65 -7.35% -0.45%
2018-03-19 HLI SQZ y 47.42 47.46 83 43.88 -7.47% -0.55%
2018-03-20 MPWR CWH n 124.27 125.11 80 114.89 -7.55% -0.21%
2018-03-21 ETFC CWH n 57.45 57.61 91 53.09 -7.59% -0.68%
2018-03-21 KEM CWH n 19.70 19.97 88 18.2 -7.61% -0.3%
2018-03-21 MPWR DB n 124.44 125.39 82 114.89 -7.67% -0.35%
2018-03-19 TTOO CWH n 6.84 6.91 95 6.31 -7.75% -3.51%
2018-03-19 INBK CWH y 38.86 39.35 80 35.75 -8% -1.31%
2018-03-20 MNTA CWH n 18.30 18.4 86 16.75 -8.47% -0.44%
2018-03-21 KBSF SQZ y 6.59 6.64 97 6 -8.95% -1.21%
2018-03-21 LRCX CWH n 223.00 224.28 90 202.63 -9.13% -0.86%
2018-03-20 HALO CWH n 20.85 21.2 86 18.59 -10.84% 0.24%
*RS Rank on day before breakout.
Top Rated Cup and Handle Stocks as of Friday March 23, 2018
Symbol BO
Price		 BO
Vol.		 Company Industry RS
Rank		 Last
Close
ATHM 88.51 1,359,099 Autohome Inc. American Depositary Shares - each rep Internet Information Providers 96 85.29
BOOM 27.25 109,012 DMC Global Inc. - Common Stock Metal Fabrication 96 26.30
VHI 6.63 238,172 Valhi - Inc. Common Stock Chemicals - Major Diversified 96 6.27
CUTR 53.30 249,606 Cutera - Inc. - Common Stock Medical Appliances & Equipment 96 51.95
CYRX 10.07 190,682 CryoPort - Inc. - Common Stock Packaging & Containers 95 9.63
WUBA 82.88 1,763,258 58.com Inc. American Depositary Shares - each repre Internet Information Providers 94 80.22
RCKY 21.70 50,295 Rocky Brands - Inc. - Common Stock Textile - Apparel Footwear & Accessories 94 20.85
ABAX 74.22 244,458 ABAXIS - Inc. - Common Stock Medical Laboratories & Research 94 73.46
DAVE 8.15 92,504 Famous Dave's of America, Inc. Restaurants 94 7.10
ALGN 271.13 1,535,523 Align Technology - Inc. - Common Stock Medical Appliances & Equipment 94 250.92
These stocks meet our suggested screening factors for our Cup and Handle Chart Pattern watchlist.
See Revised Rules for Trading Cup and Handle Breakouts
Major Index Summary
Index Value Change Week Change YTD Trend1
Dow 23533.2
 -5.67% -4.8% Down
NASDAQ 6992.67
 -6.54% 1.29% Down
S&P 500 2588.26
 -5.95% -3.19% Down
1The Market Trend is derived from our proprietary market model. The market model is described on the site here.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.
Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones NASDAQ Composite
0.47 %		 NASDAQ Composite
8.8 %		 NASDAQ Composite
1.29 %
Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Semiconductor - Memory Chips
 Semiconductor - Memory Chips
 Auto Parts Wholesale
 Resorts & Casinos
Most Improved Industry (by change in technical rank2)
Foreign Utilities
75		 Manufactured Housing
215		 Manufactured Housing
209		 Personal Computers
214
Charts of each industry rank and performance over 12 months are available on the site

 

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