An excerpt from this Week’s Sunday Stock Report – 5/20/18
– James F. Taulman, former Editor-in-Chief of the first independently licensed website to offer stock reports and services based on the CAN SLIM® investment system.
4 BreakOuts This Past Week | 11 Stocks on Our WatchList for Next Week
U.S. stocks closed mostly lower on Friday, with the major indexes posting a weekly decline as investors grappled with uncertainty over trade negotiations between the U.S. and China, as well as bond yields that climbed this week to the highest level since 2011.
For the week, both the Dow Jones and the S&P 500 fell -0.5%. This was the third weekly decline of the past four for both. The Nasdaq, where the majority of chip and technology shares are listed, closed net -0.7% lower after two up weeks.
Although, the bulls were likely hoping for a greater gains on the heels of the market’s achievements of the previous week, it was not that bad of a week for the major averages. The action was relatively tame except for Tuesday’s modest pullback.
The market just got back into gear as the major average reclaimed their respective 50-day moving averages during the previous week, and the market status was upgraded to “uptrend resumes”.
That is a key area (50 DMA) to watch next week, if any broad technical weakness continues.
Keep in mind that when a stock breaks out (become potentially buyable) – there are other factors to consider.
- Volume on the breakout. A stock that is breaking out through resistance, with an increase in volume of +50% above the stock’s average volume (50 DAV), is showing more conviction and more demand.
- Earnings. Many stocks from our watch list will break out during earnings season. Earnings breakouts can be more rewarding, however, these trades carry much more risk then traditional (non-news) breakouts. One needs to also consider – the strenght/weakness of the fundamental news that was just released along with the foward-looking guidance the company gave, investors response to the conference call, etc. For anyone who is not familiar with – buying earnings breakouts – I suggest that they sit through a few seasons to study, paper trade, and show some profits – before applying actual capital.
After running my routine stock screens over the weekend, I added 4 new stocks to our watch list.
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