The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 7 years. This subset of the different portfolios I regularly analyze has now exceeded 250 weeks of public selections as part of this ongoing live forward-testing research. The frequency of 10%+ returns in a week is averaging over 4x the broad market averages over the past 5+ years.
In 2017, the sample size began with 12 stocks, then 8 stocks in 2018, and at members’ request since 2020, I now generate only 4 selections each week. In addition, 2 Dow 30 picks are provided, as well as a new active ETF portfolio that competes against a signal ETF model. Monthly Growth & Dividend MDA breakout stocks continue to beat the market each year as well. I offer 11 top models of short- and long-term value and momentum portfolios that have beaten the S&P 500 since my trading studies were made public:
The cumulative average breakout returns for 2022 is up to +62.7% not using the gauge signal. Officially, for trading safety, there has only been one full week of a positive signal in 2022 with the 2nd worst start to the stock market since the global financial crisis. Despite record high negative momentum conditions all year, 43 picks in 17 weeks are beating the S&P 500. 29 picks are beating the S&P 500 by over 10% and as high as 126.8% (RES), +50.8% (IPI), +69.9% (TDW), +40.8% (PUMP), and +41.7% (GNK) significantly beating the major indices YTD.
Additional background, measurements, and high frequency breakout records on the Weekly MDA Breakout model is here: Value And Momentum MDA Breakouts +70.5% In 52 Weeks: Final 2021 Year End Report Card
Returns from 21 Weeks of Positive Momentum Gauge signals in 2021
Last year there were only 21 positive trading weeks to achieve +70.5% returns. For 2022 we have only had one official positive weekly signal on the Momentum Gauges® so far despite strong returns in many negative market weeks.
Momentum Gauge® trading signal: Negative conditions ahead of Week 18
Weekly return measurements have started for the 2nd quarter of 2022.
Red weekly color indicates negative Market Momentum Gauge signals. MDA breakout selections tend to outperform when the market signal is positive and negative values are below 40 level. This was an especially strong factor in 2021 showing cumulative returns below with and without the signal.
Historical Performance Measurements
Historical MDA Breakout minimal buy/hold returns are at +70.5% YTD when trading only in the positive weeks consistent with the positive Momentum Gauges® signals. Remarkably, the frequency streak of 10% gainers within a 4- or 5-day trading week continues at highly statistically significant levels above 80% not counting frequent multiple 10%+ gainers in a single week.
Longer term many of these selections join the V&M Multibagger list now up to 112 weekly picks with over 100%+ gains, 46 picks over 200%+, 19 picks over 500%+ and 8 picks with over 1000%+ gains since January 2019 such as:
- Intrepid Potash (IPI) +2,145.8%
- Houghton Mifflin Harcourt Company (HMHC) +1,413.8%
- Enphase Energy (ENPH) +1,067.0%
- Trillium Therapeutics (TRIL) +1008.7%
- Celsius Holdings (CELH) +1,006.4%
More than 200 stocks have gained over 10% in a 5-day trading week since this MDA testing began in 2017. A frequency comparison chart is at the end of this article. Readers are cautioned that these are highly volatile stocks that may not be appropriate for achieving your long term investment goals: How to Achieve Optimal Asset Allocation.
2022 Breakout Portfolio Returns
The Momentum Gauge® conditions continue with highly negative warning signals with only one full week of positive conditions in week 12 of 2022 with minimum returns of -1.0% following the signals and avoiding the 2nd worst quarter to start the year since the Global Financial Crisis.
The Breakout Picks are high volatility selections for high short-term gains, but with no selections below $2/share, under 100k average daily volume, or less than $100 million market cap. Prior returns are documented here:
- Value & Momentum MDA Breakouts +70.5% In 52 Weeks: Final 2021 Year End Report Card | Seeking Alpha Marketplace
2022 marks the worst start to the stock market since 2009 and the Momentum Gauge® MDA buy signals continue strongly negative ahead of next week. It is best to follow the signals and avoid momentum stocks until conditions turn positive.
Market Momentum Conditions
Why not avoid all the major market downturns? The Market Momentum Gauges® based on 7,500+ stocks continue negative this week at Negative 137 and Positive 18. The negative value continues above 40 warning level of adverse market conditions through 2022.
The S&P 500 gauges continue highly negative again this week closing at Negative 46 and Positive 7. The S&P 500 has been the most resilient of the major indices but continues down -13.31% YTD.
The Weekly Momentum Gauges® continue negative with only three weeks positive in the past 23 weeks since November avoiding tremendous market declines. The Weekly chart below includes the 2020 Covid Correction.
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 40 on the gauge.
The Week 18 – 2022 Breakout Stocks for next week are:
The picks for next week consist of 1 Technology, 1 Basic Materials, 1 Energy, 1 Industrials sector stocks. These stocks are released to members in advance every Friday morning near the open. Prior selections may be doing well, but for research purposes I deliberately do not duplicate selections from the prior week. These selections are based on MDA characteristics from my research, including strong money flows, positive sentiment, and strong fundamentals — but readers are cautioned to follow the Momentum Gauges® for the best results.
- Tenaris S.A. (TS) – Energy / Oil & Gas Equipment & Services
- Encore Wire Corp. (WIRE) – Industrials / Electrical Equipment
Tenaris S.A. – Energy / Oil & Gas Equipment & Services
Price Target: $36.00/share (See my FAQ #20 on price targets)
Tenaris S.A., through its subsidiaries, produces and sells seamless and welded steel tubular products; and provides related services for the oil and gas industry, and other industrial applications. The company offers steel casings, tubing products, mechanical and structural pipes, cold-drawn pipes, and premium joints and couplings; coiled tubing products for oil and gas drilling and workovers, and subsea pipelines; and umbilical tubing products; and tubular accessories.
Source: Company resources
Encore Wire Corp. – Industrials / Electrical Equipment
Price Target: $130.00/share (See my FAQ #20 on price targets)
Encore Wire Corporation manufactures and sells electrical building wires and cables for interior electrical wiring in the United States. Its products include NM-B cables for use as interior wiring in homes, apartments, and manufactured housing; THHN/THWN-2 cables and metal-clad and armored cables for use as wiring in commercial and industrial buildings; UF-B cables; XHHW-2 cables; RHH/RHW-2 cables; USE-2 cables; and other types of wire products.
Source: Company resources
Top Dow 30 Stocks to Watch for Week 18
First, be sure to follow the Momentum Gauges® when applying the same MDA breakout model parameters to only 30 stocks on the Dow Index. Second, these selections are made without regard to market cap or the below-average volatility typical of mega-cap stocks that may produce good 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 may provide some strong additional basis for investors to judge future momentum performance for mega-cap stocks in the short- to medium-term. The most recent picks of weekly Dow selections in pairs for the last 5 weeks:
|Symbol||Company||Current % return from selection Week|
|KO||Coca Cola Company||+3.76%|
|(KO)||Coca Cola Company||+5.49%|
|(JNJ)||Johnson & Johnson||+2.30%|
If you are looking for a much broader selection of mega-cap breakout stocks beyond just 30 Dow stocks with more detailed analysis and strong returns, I would recommend the Growth & Dividend MDA Breakout picks.
These selections are significantly outperforming major hedge funds and all the hedge fund averages since inception. Consider the actively managed ARK Innovation fund down -50.17% YTD.
These picks are released monthly for long term total return with strong returns that are leading the S&P 500 by +13.0% through 2022. The March selections are heavy in energy up +6.8% and the new April picks are heavy in undervalued financial stocks for long term gains. All the major market indices remain negative YTD and the 2-year returns of monthly portfolios are also shown below not including returns from large dividends over +2% for each stock:
The Dow pick for next week is:
Merck & Co. (MRK)
Merck is in strong breakout conditions despite the large market selloff and negative Momentum Gauge® warning signals. Q1 earnings beat and indicators turned sharply positive with high net MFI inflows. Price is testing key $90/share resistance for potential breakout to all-time highs.
Background on Momentum Breakout Stocks
As I have documented before from my research over the years, these MDA breakout picks were designed as high frequency gainers.
These documented high frequency gains in less than a week continue into 2020 at rates more than four times higher than the average stock market returns against comparable stocks with a minimum $2/share and $100 million market cap. The enhanced gains from further MDA research in 2020 are both larger and more frequent than in previous years in every category. ~ The 2020 MDA Breakout Report Card
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.
The 2021 and 2020 breakout percentages 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. Penny stocks well below these minimum levels have been shown to benefit greatly from the model but introduce much more risk and may be distorted by inflows from readers selecting the same micro-cap stocks.
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 also include one-year buy/hold value stocks. Remember to follow the Momentum Gauges® in your investing decisions for the best results.
All the V&M portfolio models are beating the market indices in the worst downturn since the Global Financial Crisis. The new active ETF portfolio is up +15.22% YTD beating the S&P 500 by over 28.5% and value portfolios of Piotroski-Graham picks are up +7.1% through one of the worst starts in stock market history. The Top ETF returns following the Momentum Gauge® signal from the April 21 negative daily signal are over +29%
The final 2021 returns for the different portfolio models from January of last year are shown below.
All the very best to you, stay safe and healthy and have a great week of trading!
JD Henning, PhD, MBA, CFE, CAMS