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Saturday, January 28, 2023

MDA Breakout Stocks Week 50 – December 2022: Short-Term Picks To Give You An Edge

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Andrew_Mayovskyy/iStock via Getty Images

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 7 years. This high frequency breakout subset of the different portfolios I regularly analyze has now reached 290 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 in 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.

Market Outlook

The Market and S&P 500 Momentum Gauges® have both turned negative including the Weekly Market Gauges after the longest positive signal since the November 2021 topping signal. Economic data remains weak and indicators show early moves in the next leg lower with increasing QT activity. More of these incredible charts are detailed here and in the chat rooms. A retest of 3900 key support on the S&P 500 (SPY) is very likely back to November 17th lows.

SPY chart

FinViz.com VMBreakouts.com

I have been expecting the S&P 500 market pattern to follow with another leg lower as shown above. The timing is consistent with the VIX reaching the lowest levels since the April and August market peaks. As I have said for weeks, the market reversal may also coincide with the next FOMC meeting and rate hike decision on December 13th.

VIX chart

VMBreakouts.com FinViz.com

We are still in a pattern of bearish rallies in a longer negative channel from November 2021. There are strong similarities to the volatility and patterns of 2018 and 2008 with investors very cautious. Follow the Momentum Gauges and be ready for more swift changes.

Morgan Stanley chief strategist says the bear rally has ended and the next leg lower has begun: “The Perfect Bull Trap”: Mike Wilson Turns Bearish Again, Says The Rally Is Over

JPMorgan says don’t buy here, you should be selling into S&P 500 above 3900. “We See More Selling Into Strength Here”: Why JPM’s Trading Desk Isn’t Buying This Rally

JPMorgan has changed from a bullish outlook to a base case of recession into 2023: JPM Makes 2023 Recession Its Base Case, Expects Million Jobs Lost By Mid-2024

Momentum Gauges® Stoplight ahead of Week 50. The Stock Market and S&P 500 momentum gauges and weekly gauges are negative ending the longest positive signal for 2022. The sector gauges have turned more negative with only basic materials positive on the defensive gold/silver trade.

Momentum Gauge Stoplight signals

VMBreakouts.com

The first stage of weekly and monthly sector gauges have been released on the automated Momentum Gauge website to the public!

Weekly Momentum Gauges have turned negative after the longest positive signal for 2022 of 6 consecutive weeks. Negative momentum has been increasing for the past 3 weeks.

Weekly Momentum Gauges

VMBreakouts.com

S&P 500 Daily Momentum Gauges have ended the longest positive signal for 2022 with negative momentum spiking sharply higher to start December.

S&P 500 Momentum Gauges

VMBreakouts.com

Current Returns

So far YTD 2022 there are 120 picks in 49 weeks beating the S&P 500. 96 picks are beating the S&P 500 by over 10%+ in double digits. Leading MDA gainers include (NUVL) +53.1%, (CLFD) +66.6%, (FUTU) 52.7%, (MNRL) +43.5%, (RES) +73.7%, (TDW) +150.2%, (ZYME) +43.7%, (VRDN) +110.0%, (ZYXI) +68.9%.

Despite such high negative momentum conditions all year, 52 picks in 49 weeks have gained at least 9.9% in less than a week. Additionally, 110 picks in 49 weeks have gained over 5% in less than a week in these high frequency breakout selections, despite many shortened holiday weeks.

MDA breakout returns YTD

VMBreakouts.com

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

These are highly significant statistical results that are further improved by following the Momentum Gauge signals with only 14 positive trading weeks this year. Worst case minimal returns following the MG trading signals are beating the S&P 500 YTD by +14.5%.

Leveraging The Momentum Gauges With ETFs

In addition to timing MDA breakout stock picks for the best returns, the gauges are used for live ETF bull/bear timing signals with strong results.

ETF Combo Returns

VMBreakouts.com

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.

Annual MDA Breakout returns

VMBreakouts.com

V&M Multibagger List

Longer term many of these selections join the V&M Multibagger list now at 111 weekly picks with over 100%+ gains, 53 picks over 200%+, 18 picks over 500%+ and 11 picks with over 1000%+ gains since January 2019 such as:

  • Celsius Holdings (CELH) +2,320.0%
  • Enphase Energy (ENPH) +2,210.6%
  • Northern Oil and Gas (NOG) +1,067.9%
  • Trillium Therapeutics (TRIL) +1008.7%

More than 300 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

The Week 50 – 2022 Breakout Stocks for next week are:

The picks for next week consist of 1 Consumer Cyclical, 2 Healthcare, and 1 Consumer Defensive sector stocks. These selections are heavily in China stocks based on record QE activity to support their markets. These stocks are measured from release to members in advance every Friday morning near the open for the best gains. 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.

  1. ATRenew Inc. (RERE) – Consumer Cyclical / Internet Retail
  2. TAL Education Group (TAL) – Consumer Defensive / Educations & Training Services

ATRenew Inc. – Consumer Cyclical / Internet Retail

RERE chart

FinViz.com

Price Target: $3.50/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

ATRenew Inc., through its subsidiaries, operates pre-owned consumer electronics transactions and services platform in the People’s Republic of China. It primarily sells mobile phones, laptops, tablets, drones, digital cameras, household products, and bags through its online platforms and offline stores, as well as provides services to third-party merchants to sell the products through its platforms.

RERE report

StockRover.com

TAL Education Group – Consumer Defensive / Educations & Training Services

TAL chart

FinVIz.com

Price Target: $9.00/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

TAL Education Group provides K-12 after-school tutoring services in the People’s Republic of China. The company offers tutoring services to K-12 students covering various academic subjects, including mathematics, physics, chemistry, biology, history, geography, political science, English, and Chinese.

TAL report

StockRover.com

Top Dow 30 Stocks to Watch for Week 50

First, be sure to follow the Momentum Gauges® when applying the same MDA breakout model parameters to only 30 stocks on the Dow Index. Conditions have delivered the worst first half to the stock market since 1970. 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. The most recent picks of weekly Dow selections in pairs for the last 5 weeks:

Symbol Company Current % return from selection Week
V Visa Inc. -4.12%
(MRK) Merck & Co. -1.15%
V Visa Inc. +1.81%
(VZ) Verizon -2.38%
(HON) Honeywell International -1.35%
(V) Visa Inc. -1.00%
CVX Chevron Corp. -9.09%
DOW Dow Inc. -3.33%
(NKE) Nike Inc. +14.23%
(DOW) Dow Inc. +2.39%

If you are looking for a much broader selection of large cap breakout stocks, I recommend these long-term portfolios. The new mid-year selections were released to members to start July:

Piotroski-Graham enhanced value

  • July midyear at +7.41%
  • January portfolio beating S&P 500 by +27.93% YTD.

Positive Forensic

  • July midyear down -15.33%
  • January Positive Forensic beating S&P 500 by +8.72% YTD.

Negative Forensic

  • July midyear down -25.39%
  • January Negative Forensic beating S&P 500 by +27.56% YTD

Growth & Dividend Mega cap breakouts

  • July midyear down -0.67%
  • January portfolio beating S&P 500 by +12.89% YTD

These long-term selections are significantly outperforming many major Hedge Funds and all the hedge fund averages since inception. Consider the actively managed ARK Innovation fund down -63.37% YTD, Tiger Global Management -58% YTD.

The Dow pick for next week is:

McDonald’s (MCD)

McDonald’s is a strong defensive stock as the next market pullback is set to begin. Institutions are net buyers int he current quarter and strong support at $270/share could stabilize markets into the next downturn. Indicators are all positive with net MFI inflows.

Finviz Chart MCD

FinViz.com

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.

MDA breakout frequency charts

VMBreakouts.com

The 2021 and 2020 breakout percentages with 4 stocks selected each week.

MDA Breakout frequency charts 2020/2021

VMBreakouts.com

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.

Conclusion

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 through the worst 6 month start since 1970, record inflation and Fed tightening intervention. New mid-year value portfolios are again leading the major indices to start the next long-term buy/hold period.

V&M Breakout Portfolio returns YTD

VMBreakouts.com

The final 2021 returns for the different portfolio models from January of last year are shown below.

V&M Breakout portfolio returns 2021

VMBreakouts.com

All the very best to you, stay safe and healthy and have a great week of trading!

JD Henning, PhD, MBA, CFE, CAMS





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