Two sample Breakout Stocks for Week 4 with better than 10% short-term upside potential and one sample Dow 30 stock pick.
The streak of weekly selections gaining over 10% in less than 4 or 5 trading days continues to 115 out of 141 trading weeks (81.56%).
This past Week 4, CELH gained more than 18.5% in less than 4 or 5 trading days, peaking as high as 24.4%. Portfolio avg gain +4.72%.
The Federal Reserve conducted an “organic QE” easing event in Week 4 of +$12.7 billion. Delivering increased liquidity in 13 of the past 14 weeks.
The Momentum Gauges™ closed Friday at negative 56 and positive 43 signaling the first negative market signal since Sep 25th, 2019.
This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Get started today »
The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 5 years. This subset of the different portfolios I regularly analyze has now reached 141 weeks of public selections as part of this ongoing live forward-testing.
In 2017 the sample size began with 12 stocks, then 8 stocks in 2018, and at members’ request into 2020, I now generate 4 selections each week, 2 Dow 30 picks, and a separate article for Growth & Dividend MDA breakout stocks.
Remarkably, the frequency streak of 10% gainers within a 4 or 5 day trading week remains at highly statistically significant levels above 80%, not counting the multiple 10% gainers in a single week. More than 150 stocks have gained over 10% in a 5 day trading week since this MDA testing began in 2017.
Momentum Breakout Stock Portfolio 2019 results YTD
As I have documented before from my research over the years, these MDA breakout picks were designed as high frequency gainers:
The point to be made is that the Momentum Breakout model was designed to increase the frequency, i.e. the rate over time, for selecting stocks that make greater than 10% moves. I know that when using the arbitrary period of 1 week (4 or 5 trading days) this model is consistently outperforming the market at more than 4 times the expected market frequency. So what if I take a look at longer momentum survivors? Can we see decay in performance among the top stock selections? ~ Value & Momentum Breakouts 2017
The frequency percentages remain very similar to returns documented here on Seeking Alpha since 2017 and at rates that greatly exceed the gains of market returns by 2x and as much as 5x in the case of 5% gains.
(Value & Momentum Breakouts)
These percentages reflect the results from 208 MDA breakout selections through 2019 across 52 weeks with 4 stocks selected each week. MDA selections are restricted to stocks above $2/share, $100M market cap, and greater than 100k avg daily volume. An additional Stock Market column was added to compare similar groups that exclude high volatility penny stocks below $2/share.
2020 YTD Breakout Portfolio Returns
The Breakout Picks are up +22.84% worst case, buy/hold, equal weighted returns through Week 4 compared to the S&P 500 +1.67%. Best case average weekly returns are 11.48% and worst case 5.71% YTD as shown below. Week 4 closed with average gains of +4.72% compared to -1.04% for the S&P 500.
(Source: Value & Momentum Breakouts)
These breakout picks skew highly positive for high frequency short-term gains in less than 5 days as documented over the past 3 years.
The Breakout Returns are up +125.77% since inception. These returns continue to outpace the S&P by over 3.5x after three years using the signals. Avoiding trades during the weeks when the Momentum Gauge™ signals turned negative as shown within the four numbered monthly periods outlined on the chart below has greatly increased total returns to over 140% since inception.
The Momentum Gauge™ signals turned negative today in a 5th event and for the first time in 2020. You can see how the 4 prior events numbered above relate to the Momentum Gauge tops shown below. Timing your investments during the most positive momentum periods greatly enhances your weekly returns. Additionally, the Friday positive anomaly has been a very key factor accounting for more than 50% of all the gains in the S&P 500 YTD 2019.
(Value & Momentum Breakouts)
The Momentum Gauge™ signals are also the basis of a significant new market neutral trading model released here for subscribers to use with bull/bear ETF combinations or just to avoid significant market downturns:
Strongest Market Timing Signals To Enhance Bull/Bear ETF Returns(Value & Momentum Breakouts)
The bull/bear ETF trading signal page is now shifting to inverse market funds consistent with the new negative Momentum Gauge™ signal today.
- MicroSectors FANG+ 3x Index bull/bear (FNGU)/(FNGD) +187.34%
- Direxion Daily S&P 500 3x bull/bear (SPXL)/(SPXU) +110.80%
- SPDR S&P 500 (SPY)/ ProShares Short S&P 500 (SH) +32.91%
- Alpha Architect Intl Momentum (IMOM)/Dorsey Wright Short (DWSH) +38.74%
- ProShares UltraPro Nasdaq 3x bull/bear (TQQQ)/(SQQQ) +131.63%
- Direxion Daily 3x Small Cap bull/bear (TNA)/(TZA) +130.82%
- Direxion Daily 3x Biotech bull/bear (LABU)/(LABD) +94.90%
- MSCI 3x Emerging Market Index bull/bear (EDC)/(EDZ) +29.61%
- VIX Index 1.5x bull/bear (SVXY)/(UVXY) +98.23%
Market Conditions into Week 5
Fed intervention occurred again this past Wednesday. We can now confirm that the Fed delivered easing of $12.7 billion on Wednesday, Jan 22nd continuing this policy in 13 of the past 14 weeks. This brings the total easing to $192.2 billion in liquidity just the past 14 weeks. Fed easing was a very positive condition for the markets between 2009 and 2017, it has only returned in limited form since July 31, 2019.
System Open Market Account Holdings – Federal Reserve Bank of New York
The Weekly Momentum Gauge™ chart below shows the Fed’s actual balance sheet action in dark blue over the original Fed scheduled QT (light blue). The chart shows confirmation of a positive momentum signal from Oct 15th on the daily momentum chart. We completed our fourth consecutive week of declines of the positive momentum conditions. This could be an early market topping signal. The Daily Momentum Gauges™ have already turned negative and this indicator has correctly called every significant market change since its official inception in 2017. Final weekly confirmation occurs when the red line crosses above the green line on the weekly chart below.
(Value & Momentum Breakouts)
The more detailed Daily Momentum Gauge™ chart is reserved for members and has been expanded to more closely examine the past 3 months. The Momentum Gauges™ closed Friday after hours at 56 Negative and 43 Positive. An intraday trading alert went out to members today at 11:30am ET that the gauges had turned negative for the first negative signal since September 25th, 2019. We will look for more confirmation on Monday. These movements and signals were updated in more detail through the Daily Update articles this past week:
- V&M Breakout Morning Update – Jan 24: Fed Eased $12.7 Billion This Week And Market Indexes Back To New All Time Highs Premarket
- V&M Breakout Morning Update – Jan 23: Markets Mixed, Crude Oil Falling Amid Concerns Of Spreading Coronavirus, While Nasdaq Tops 9,200.
- V&M Breakout Morning Update – Jan 22: Markets Hit New Record Highs As Fed Intervention Wednesday Arrives
- V&M Breakout Morning Update – Jan 21: Markets Down Slightly As Senate Impeachment Process Begins
Two conditional signals that are very important to watch:
- Avoid/Minimize trading when the Negative score is higher than the Positive momentum score.
- Avoid/Minimize trading when the Negative score is above 70 on the gauge.
The Week 5 – 2020 Breakout Stocks for next week are:
The Week 5 stocks consist of two Technology, one Financial and one Healthcare sector stock. These selections started very strong in the morning but face the first negative Momentum Gauge™ signal for 2020 with higher uncertainty and declining market momentum conditions.
- Agile Therapeutics (AGRX) – Healthcare/Drugs – Generic
- Eventbrite Inc. (EB) – Technology/Application Software
Agile Therapeutics – Healthcare/Drugs – GenericPrice Target: 5.00
|Jan-10-20 09:33AM||The Zacks Analyst Blog Highlights: Agile Therapeutics, Air Industries, Dermira, Microbot Medical and Cassava Sciences Zacks|
|Jan-09-20 06:19AM||Buy Multibagger Stocks as Odds of a Rally Are High in 2020 Zacks|
|Jan-07-20 10:22AM||The Zacks Analyst Blog Highlights: Agile Therapeutics, Ares Capital, Cable One, Evolution Petroleum and Royal Gold Zacks|
|Jan-06-20 08:14AM||Here’s How to Play Stocks as US-Iran Tensions Mount Zacks|
|Jan-06-20 08:00AM||Agile Therapeutics to Present at the 38th Annual J.P. Morgan Healthcare Conference in San Francisco GlobeNewswire|
Agile Therapeutics, Inc., a women’s healthcare company, focuses on the development and commercialization of prescription contraceptive products for women. Its lead product candidate is Twirla, also known as AG200-15, a once-weekly prescription contraceptive patch, which completed Phase III clinical trials.
Eventbrite Inc. – Technology/Application SoftwarePrice Target: 25.00
|Jan-23-20 01:35PM||Does This Valuation Of Eventbrite, Inc. Imply Investors Are Overpaying? Simply Wall St.|
|Dec-27-19 02:10PM||Concert ticket prices rose 55% over the last decade: WSJ Yahoo Finance Video|
|Dec-12-19 04:19PM||Edited Transcript of EB.N earnings conference call or presentation 7-Nov-19 10:00pm GMT Thomson Reuters StreetEvents|
|Dec-07-19 08:26PM||Hedge Funds Have Never Been This Bullish On Eventbrite, Inc. Insider Monkey|
Eventbrite, Inc. operates a ticketing and event technology platform in the United States and internationally. Its platform integrates components needed to plan, promote, and produce live events that allow creators to reduce friction and costs, increase reach, and drive ticket sales.
Top Dow 30 Stock to Watch for Week 5
Applying the same breakout model parameters without regard to market cap or the below-average volatility of mega-cap stocks may produce strong breakout results relative to other Dow 30 stocks.
While I don’t expect Dow stocks to outperform typical breakout stocks over the measured five-day breakout period, it can provide some strong additional basis for investors to judge future momentum performance for mega-cap stocks in the short- to medium-term.
In the prior week the picks were Intel Corp. (INTC) and Pfizer, Inc. (PFE) with both gaining well until today’s downturn. Last week The Travelers Companies, Inc. (TRV) fell despite strong positive Q4 earnings report and 55% year over year improvement on the bottom line. United Technologies Corp. (UTX) gave back its slight gains at the close today to finish up +0.78% beating the S&P 500 losses of -1.04% for the week.
The Dow pick for next week is:
Intel returns to the Dow 30 breakout picks up +16.17% since Week 3 and delivered strong Q4 earnings beat today to send MDA breakout criteria and conditions even higher.
These stocks continue the live forward-testing of the breakout selection algorithms from my doctoral research with continuous enhancements over prior years. These Weekly Breakout picks consist of the shortest duration picks of seven quantitative models I publish from top financial research that include one-year buy/hold value stocks.
These momentum picks are different from the Weekly Bounce/Lag momentum picks with a 2% trailing stop loss methodology by Prof. Grant in his weekly selections that are now no longer provided publicly in a weekly article and remain a private feature along with the Premium Portfolio.
Also the new MDA breakout Growth & Dividend stocks have started for 2020.
All the very best to you and have a great week of trading!
JD Henning, PhD, MBA, CFE, CAMS
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.