Breakoutwatch Weekly Summary 07/11/20

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Weekly Commentary
New Buy at Open and Buy on Alert Guidelines (see Strategy Suggestions)

The NASDAQ continued to power ahead with a gain of 4% this week, setting another new high on Thursday. The index slipped slightly on Friday as volume sagged as traders took the afternoon off. The S&P 500 and DJI also gained although at a smaller rate. Significantly though, the  small-cap Russell 2000 slipped 0.5% indicating the lower prospects for smaller business in this challenging economy.
NASDAQ Chart
Cup and Handle pattern stocks delivered 6 breakouts for an average gain of 7.2%. To qualify as a breakout, a cup and handle pattern stock must close above its breakout price on volume at least 1.5 times the 50 day average volume. As we shall see below, my latest research into Buy at Open and Buy on Alert strategies indicates that in the current bull market, a volume of just one times adv is sufficient to deliver a satisfactory return.
Chart of the Week
There were no stocks on the latest Cup and Handle Pattern watchlist that meet all the criteria to buy on alert on Monday. All of them failed to meet the 1.25 times ADV criteria.  Lakeland Industries is a PPE manufacturer with an RS Rank of 95. Although this may not be a buy on Monday, we are hearing of serious shortages of PPE arising again, so it could be one to watch.
LAKE Chart
New Features this Week

No new features this week
Strategy Suggestions
I have spent some time this week using the cup and handle backtest tool to look at which stocks have performed best in the current bull market. This has led me to seriously revise the Buy at Open and Buy on Alert strategies. Time hasn't allowed me to completely rewrite the Strategy Suggestions page, which I will try to update in the coming week.

Most significantly, I have found that whereas the previous guidelines suggested a maximum BoP of $20 and minimum volume, these limitations must be raised. This is perhaps not surprising in this bull market where Government support has flowed to the bigger, more expensive, companies which are the most likely to survive a prolonged downturn. Similarly, it is the companies with the best performance compared to their peers that do best.
If using the Buy at Open strategy, there is risk that overnight sell orders to take profits will have been entered. The backtest showed that stock with an RS Rank of 90 were less prone to this.Hence the minimum RS Rank to buy has risen to 90%, limiting candidate stocks to 10% of the overall market. For the Buy on Alert strategy there is not the same risk and RS Rank stocks greater than 80 gave the best performance.

The table below shows the characteristics required to generate the best returns (as revealed by the backtest tool) since April 1, the approximate confirmed start of the bull market. The table also contains a link to an image of the backtest results. I have set the default parameters for the backtest to these parameters.


 Buy on Alert Buy at Open
Trail Stop Method Upper ATR** Upper ATR**
Max BoP $1,000 $1,000
Min. Avg. Volume >= 1,000,000 >= 1,000,000
Watchlist Date Vol. To ADV Ratio 1.25 N/A
Confirmation Vol to Adv Ratio >= 1.0 >= 1.0
Buy Stop above BoP 5% 5%
Number of Simultaneous Positions* 1 1
Sell on Unconfirmed Yes N/A
Minimum RS Rank 80 90
Model Gain since 04/01/20 115% 48%
Backtest Link Buy on Alert Buy at Open

* Setting the number of positions to 1 in the backtest allocates all available cash to the current buy. This maximizes the return calculated by the tool. You can experiment with other less aggressive options in the tool.
** The Upper ATR value is obtained from Analytical Tools > Trailing Stop Calculator. The Trailing Stop volume must be given to your broker each day before market open.
Breakouts Summary by Watchlist for Week Beginning 07/06/20
List Breakouts Avg. Gain
CWH 6 7.21
SQZ 3 0.13
HTF 3 1.04
HSB
0
DB
0
Breakouts Detail for Week Beginning 07/06/20
Brkout Date Symbol Base Squeeze Brkout Price Brkout Day Close RS Rank* Last Close Current % off BOP Gain at Intraday High
2020-07-06 BABA CWH y 231.03 240 81 261.01 12.98% 16%
2020-07-09 ROKU CWH n 135.87 149.69 82 153.05 12.64% 17.65%
2020-07-08 EVSI CWH n 10.75 12.21 93 11.59 7.81% 15.35%
2020-07-07 LGIH HTF y 95.24 97.67 90 101.61 6.69% 8.73%
2020-07-06 EDU CWH y 141.37 143.84 84 148.39 4.97% 5.22%
2020-07-08 DDOG HTF n 93.00 96.13 96 96.41 3.67% 6.43%
2020-07-07 ALNY CWH n 158.37 160 90 162.25 2.45% 3.61%
2020-07-07 GRBK CWH y 12.40 12.65 83 12.7 2.42% 6.69%
2020-07-06 EVBG SQZ y 146.50 147.37 95 147.18 0.46% 4.99%
2020-07-08 GRBK SQZ y 12.66 12.91 86 12.7 0.32% 4.5%
2020-07-09 FTNT SQZ y 146.36 149.6 89 145.8 -0.38% 3.82%
2020-07-06 MCFT HTF n 19.99 20.6 82 18.54 -7.25% 4.1%
*RS Rank on day before breakout.
Top Rated Cup and Handle Stocks as of Friday July 10, 2020
Symbol BO
Price		 BO
Vol.		 Company Industry RS
Rank		 Last
Close
AKBA 13.70 2,884,791 Akebia Therapeutics - Inc. Biotechnology 96 11.98
CBB 14.98 1,013,248 Cinci Telecom Services 95 14.90
CTSO 10.48 814,346 Cytosorbents Corporation Medical Devices 94 10.14
CVM 17.10 1,209,870 Ce Biotechnology 89 14.30
RAD 18.64 6,115,311 Rite Aid Corporation Pharmaceutical Retailers 88 16.21
CNSL 7.26 714,969 Consolidated Communications Holdings - Inc. Telecom Services 85 6.23
UNIT 9.75 2,986,686 Uniti Group Inc. REIT - Industrial 85 9.24
MEET 6.26 1,898,994 The Meet Group - Inc. Internet Content & Information 83 6.24
BITA 15.95 994,388 Bitauto Holdings Limited Advertising Agencies 82 15.86
SY 16.06 1,155,123 So-Young International Inc. Health Information Services 81 14.12
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 26075.3
 0.96% -8.63% Up
NASDAQ 10617.4
 4.01% 18.33% Up
S&P 500 3185.04
 1.76% -1.42% Up
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
NASDAQ Composite NASDAQ Composite
29.6		 NASDAQ Composite
15.67		 NASDAQ Composite
18.33
Best Performing Industry
1 Week 3 Weeks 13 Weeks 26 Weeks
Silver
 Grocery Stores

Most Improved Industry (by change in technical rank2)
Aluminum
50		 Aluminum
57		 Recreational Vehicles
102		 Gold
200
Charts of each industry rank and performance over 12 months are available on the site

 

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