It’s been quite awhile since I’ve posted a Breakout Highlights report… my apologies for the limited posting of late, but with some projects I’m working on for SelfInvestors.com and the lackluster market it’s been both difficult to find the time and enthusiasm to write about the markets of late.  Once the project is done in a couple weeks, I’ll be posting much more frequently.  Although with the bulk of earnings coming up this week, don’t forget to check out the Earnings Highlights posts each morning which take a look at stocks moving big either way on earnings.  That will begin tomorrow.

It’s no secret that breakout stocks don’t fare well in a sliding market as we’ve seen over the past several weeks.  In the past 2 weeks the SelfInvestors.com database tracked a limited number of unsuccessful breakouts.  Just two of the 15 breakouts finished the period with a gain – Cascade Bancorp (CACB) and Cash America (CSH), both up 2%.  Twelve finished with losses (and they were fairly steep with an average loss of around 9%).  Despite the poor performance, just 3 stocks made what I would call failure moves (an 8% or more drop AND below the first major level of support).

Now is certainly not the time to try and chase a bottom, especially with CPI and PPI data, FOMC minutes and Mid East violence all expected to create big time volatilitly in the coming days.  However, there are some opportunities in this top breakouts list worth putting on the ‘ol watch list for future consideration.

To see the larger image of the list

The best opportunity in the list that I see is Cascade Bancorp (CACB) which broke out with force following an outstanding earnings report on Thursday.  Technicals look for very strong as well with a nice shallow base followed by the high volume breakout to a new all time high.  It’s returned to a buyable range today, but it’s probably best to wait to see how it reacts to the upcoming inflation data on Wed and Thurs, which would weigh heavily on the Fed’s decision with future rate hikes.

It’s no surprise that as goes the market, so goes the success of breakout growth stocks.  Needless to say, it’s been a rough go over the past month.  I haven’t seen this kind of anemic performance since I put my tracking database together about 2 years ago. 

• In the past 2 weeks there was just one breakout of a highly ranked stock (ranked 50/60 or above combined technical and fundamental score) in Advanced Environmental Recycling Technologies (AERTA) which is currently up 15% since the breakout.

While the base  is a bit steep (which is more common in lower priced stocks) the volume and price action in AERTA reveal that there is a ton of demand for this one.  I’ve mentioned in several previous posts over the past couple years that stocks often provide a few buying opportunities on the way up.  The first opportunity in this one was provided on May 3rd after it broke out from the first pivot at 2.40.  I began covering this stock at www.selfinvestors.com the morning of the second breakout at 2.64 on May 18th when it was added to the database.  It’s currently overextended but may provide a decent opportunity on a pull back to the 20 day moving average.

Advanced Environmental Recycling Technologies (AERTA) develops, manufactures, and markets composite building materials that are used in place of traditional wood or plastic products for exterior applications in building and remodeling homes and for certain other industrial or commercial building purposes.  The company appears to be hitting its stride after a record year in ’05 while being named Lowe’s Vendor of the Year.  Consistency could be better but this is certainly a company to keep a close eye on.

• In the month of May, there were just 7 breakouts in the database (that includes AERTA), with Infosonics (IFO) and J2 Global Communications (JCOM) being the only other highly ranked breakouts in the month (both rank 50/60).  IFO has risen an astonishing 89% from the first breakout point at 14.  Wow!

Again, this is a stock that has provided two breakout points but I would not have entered a trade at either point.  Technically, the first breakout occurred on May 8th at 14, but I would not have purchased here because the company was reporting earnings the following morning (I rarely hold a small growth stock through earnings).  I was looking for an entry the following morning, but the stock gapped up and never provided a low risk entry.  Considering the market looked tired at that point, it was too much risk to take on.  Of course in hindsight I wish I had pulled the trigger, but you have to stay disciplined.  The stock provided a second entry on a break to all time highs, but again, the risk vs reward doesn’t look favorable up here.  With poor market conditions and a doubling of the stock in just weeks, it’s due for a fall.

InfoSonics (IFO) is a distributor of wireless handsets and accessories in the United States and Latin America and it’s a company that continues to grow rapidly.  Earnings per share over the past 3 years have increased from .08 share in ’02 to .38/share in ’05.  2006 is expected to be another record year with expectations for .66/share. 

• Total Stats For May
  38 Total Breakouts – 7  finished with gain (avg gain of 18%)
                                 6 finished with no gain
                                25 finished with loss (avg loss of 11%)

Catch Breakouts As They Happen With SelfInvestors.com Email Alerts!

Tags: trading stocks | charts | recycable materials | JCOM

Several weeks ago I began following FMCN as part of a new category of posts which aims to follow a particular stock through a holding period (the stock may or may not be held in my SelfInvestors Model Portfolio or me personally).  I will try and be good about disclosing this info.  FMCN does happen to be a stock I have held in the SelfInvestors Model Portfolio as well as personally.  Similar to what the overall market did while I was away, FMCN pushed higher with uninspiring volume and appeared to be finding resistance at around 70.  This was never a position I was going to hold through its earnings report (which is tomorrow), so I was looking for exit point.  Exiting a position is always a much more difficult decision than buying, but in this case it was really a no brainer.  With some resistance near 70, earnings fast approaching and the market beginning to deteriorate it made sense to unload the position, which I did on May 12th at 67.79.  This locked in a gain of 11.68% on my original $20K position and a 5.5% gain on the add on position of $7500.  Not spectacular gains, but I’ll take it and watch the volatility after earings are reported from the sidelines.

Today’s Market Action ~

This is the kind of action that can set up a capitulation move and mark a bottom, but we’re going to do need some fast and furious buying in the last hour.  Should be interesting.  Note that the Nasdaq has tested that support level I discussed yesterday, but the S&P and Dow are now in trouble as well.  I’ll take a look at the Dow and S&P tomorrow.

Wanted to give an update of Focus Media (FMCN), a stock I currently have has the highest rated stock in my database (see more here for your own access) and a stock I purchased on April 6th.  You can see the first entry regarding FMCN here.  The stock still looks good technically but has been meandering a bit.  I’m waiting for the big confirmation move up with a spike in price and volume. 

On April 18th, I added additional shares to my originial position (about 30% of the originial) on anticipation of a big confirmation move.  It didn’t quite turn out the way I had hoped as the stock never added to those gains, but i’m still confident that move will occur.  If not, I’m still in position to get out with a small gain or loss.  Lots of reward potential vs. very little risk.  Here’s the intraday chart from April 18th, which shows my entry point as the stock took out the intraday high with good volume.

One news story of note in the past couple of days is word that a competitor is suing the company for 1.7 million for unfair competition.  Link to news story.

With the market in a continuing retracement from the highs and testing support again, it’s been a mediocre couple of weeks for breakout stocks, that is unless you’re talking about anything related to metals and oils, both of which continue to march higher. 

Over the past 2 weeks (the period of April 1st through April 15th), I have tracked a total of 32 breakouts, with 21 finishing the period with a gain, 3 finishing flat and 8 down.

The biggest winners came from the industrial arena with gains of 11% in both USG Corp (USG), the large distributor of building materials & Gehl Co. (GEHL), the heavy equipment manufacturer.  Both stocks are consolidating in a healthy manner after the initial breakout.

The biggest loss in the period belonged to EZ Em Inc (EZEM), which broke out from a base on the day it was to report earnings, only to reverse sharply the next morning after reporting less than stellar earnings after the bell.  The stock is currently 21% below the breakout point.  Yet another example of why it’s a good idea to avoid holding small to mid cap stocks through earnings.  You may hit a home run once in awhile, but ultimately it’s just not worth the added risk in my opinion.

Let’s have a look at the top rated breakouts in the period.  As always, you may click here to see a larger image of a screenshot of the database.

The top rated breakout in the period was Focus Media Holdings (FMCN), which happens to be a stock I’m currently tracking here at the blog.  You’ll notice that the rest of the list is a good representation of the overall trend in breakouts over the period with a few top rated oil breakouts in Arena Resources (ARD), W&T Offshore (WTI) and Superior Well Services (SWSI); a gold breakout in Rio Tinto (RTP) and some industrials joining the party with top rated breakouts in Airgas (ARG) and Sterling Construction (STRL). 

** Both SWSI and STRL were mentioned in a "Hot Stocks" report several days ago.  If you missed that report, you can find it here.

Let’s have a look at a few charts real quick. 

You could say that the first breakout occurred from a double bottom base just above 200 long before it broke to a new all time high, but you could have initiated a position on a breakout to a new all time high as well.  Before today’s move, the stock pulled back to near the breakout point and offered a decent entry, but I don’t like the volume behind today’s move.  It’s suspicious. 

I have Arena as one of the highest rated oil stocks and it broke out nicely last week.  While the base is a little on the steep side, I like the tight price action and volume levels continue to look really good.  As oil approaches resistance levels up around 70, the chances of some retracement are good and might allow for some great entry points in oil in the next week or two.  This is one to keep an eye on.

Technically, ARG cleared my first breakout point, but it never confirmed the breakout by following the move to new highs with additional surges in price and volume.. So it continues to digest the big gap up in mid January in a healthy manner.  I’ll be readjusting my pivot point in the database soon, as it appears the stock will form some sort of flat base here before attempting another breakout move.  Keep an eye on that support level of the 50 day moving average.

CRESY is a really interesting opportunity in the global real estate arena.  Cresud Sacif is a leading agricultural Argentinian company that is considered a REIT due to its large holdings of farmland.  After the collapse of its currency (97′ I believe?), the country is quickly getting back on its feet.  Given the trend of more investors putting money into these emerging markets, property prices will surely continue to rise in certain overseas markets.  It used to be that retired (so called expats bought real estate and lived overseas), but with improvements in technology and more retirees and young people alike priced out of US real estate markets, this trend will only continue, improving the economies of these emerging markets and raising land values (check out the Gary Scott article about living and working overseas if you haven’t already.. interesting insight)  CRESY is one of the few ways that I know of to play the global real estate boom through the US stock market.  If anyone has some other ways to play this feel free to comment below.

The chart of CRESY provides a good example of how stocks can sometimes offer several opportunities to initate a position.  I always look for the first breakout point above resistance levels of both the 50 day and 200 day moving averages.  Once the first consolidation takes place above these levels I can set my first breakout point (in this case around the middle of February).  While the 2nd opportunity occurred on a break above the highs of mid September ’05, I would not have nibbled here.  The stock had come too far too fast.  A better opportunity arose after the stock consolidated those gains and returned to near the first breakout point around 12.75.  Notice it retested resistance around 14.50 and dropped back to near 13 again before making another significant move higher.  Well, its retracing that move too and coming in to the 50 day moving average, potentially offering another area to pick up shares provided it can find support there.  Pick your entry points carefully.

In the past few months I’ve felt that the blog has become a bit dry, so I’ve been thinking of ways I could create some more interesting posts.  I’ll  continue to provide a look at the overall market and provide watchlists of top stocks that have recently broken out, but I’d like to also take a closer look at individual stocks and how I’d trade them on a day to day basis.  From buy to sell and everything in between.  The first stock I’d like to take a look at is Focus Media Holdings (FMCN), currently the highest rated stock in my database.

Founded in 2003, Focus Media is the leading out of home audiovisual media network in China, reaching high income individuals in over 20,000 commercial buildings (airports, shopping malls, golf country clubs, retail stores) in 44 major cities.  On Jan 9^th , 06 Focus media acquired its largest competitor which makes them the dominant player in China’s office building advertising industry and has allowed them to raise advertising rates.  The buying didn’t stop there.  The company is moving into the mobile phone advertising industry in a big way with the acquisition of Dotad Media Holdings last month.  Dotad is  a leading mobile-phone advertising service provider in China that owns the largest WAP advertisement delivery platform through China Mobile and China Unicom and controls nearly 80% of this market.

Phillip Lin of the China Stock blog provides some thoughts on the Dotad acquisition.
http://chinastockblog.com/article/7491

This is a company expanding rapidly.  In the March ’04 quarter, FMCN posted sales of just 3.1 million.  A year later they more than tripled sales to 9.6 million and are on pace to triple sales again in the ’04 to ’05 period.  Earnings growth has been equally impressive by nearly tripling in the same time periods.

There are some valid concerns over government regulation and competition which readers of the China Stock Blog recently expressed in a post several days ago.
http://chinastockblog.com/article/8184

Since I’m a shorter term trader that relies (for the most part) on the action of the chart, I personally don’t concern myself much with how the company might be regulated or how the competition could steal market share a year or two from now.  While, a regulatory announcement could certainly hit the stock overnight, the likelihood of that anytime soon is remote.  What is of importance to me right now is that the company continues to post impressive growth and the chart continues to look outstanding.  Currently, I have FMCN as the highest rated stock in the world and it’s why I have a long position in it.   Let’s take a look at the chart.

After triping in price in less than a year following the IPO in summer of ’05, FMCN has traded fairly quietly in a channel to start of ’06 and recently broke out of that channel for the first time on March 31st with decent volume.  It stalled a bit at 60, but it didn’t take long for the stock to clear that source of minor psychological resistance.  Note this is where I initiated an entry in the stock.  Since that breakout the stock has formed a mini triangle pattern (always a bullish pattern), setting up the move for another surge higher.  As I write this post, the stock is breaking out from this mini consolidation this morning.  While the market is on shaky ground here, I’ll continue to hold the position as long as this pattern holds.

The following table is a screenshot of a portion of the SelfInvestors.com "Hot Stocks" screen. SelfInvestors Hot Stocks are stocks showing big demand and within a buyable range (5% from breakout), near a breakout or within 5% of the 50 day moving average.

Want access to this screen and many others everyday?  Try out the SelfInvestors.com premium membership today at no risk!

(see the larger image here)

Here’s a rundown of the charts….. its important to remember that just because a stock is technically in a "buyable range", doesn’t mean that it’s an automatic buy.  Always consult the chart before making a buy or sell decision. You want to give yourself the best chance of success.  If a stock doesn’t provide you with a great entry point, move on to the next one.  There are too many opportunities to accept anything less than a great entry point.

ICON is showing great demand in its chart which is characterized by high volume buying and low volume selling.  Additionally, price action is tight throughout which is always a positive.  Wide, loose price action indicates too many are watching the stock or too much manipulation.  I tend to avoid these kinds of stocks.  ICON broke out of a much larger base late last year and recently broke out from a much shorter base recently as buy volume continues to surge higher.  Due to the shortness of the base and the fact it didn’t form a handle I would not have touched this one after it moved to a new all time high.  Instead, I want to see it consolidate quietly back to the point of the breakout around 14.50 or so.

SHFL is a very good example of a stock within a buy range, but not a great buy right at this moment.  The stock has run up more than 50% in just a couple weeks and needs time to digest those gains.  Why not be patient and see if a better buy point is offered?  Maybe it will return to the breakout point around 34.

VIVO recently broke out from a short base around 26 and has been bouncing around between that breakout point and the all time high around 28.  There are a couple of ways that I would play this thing.. one way is to buy as close to the pivot as possible around 26.  Another option is to wait patiently and see if the stock forms another handle around the highs .. look for a strong breakout above all time highs at 28 as an opportunity.

While SCSS has had a tremendous run over the past several months, the technical action remains very bullish.  The stock recently broke out from a flat base and has been treading quietly since.  Again, I’d play this a couple ways if the original breakout was missed.  I could wait for a pull back to the breakout point (assume it’s an orderly pull back) to around 38 or wait for a break out from the current consolidation above 40 (although I wouldn’t be initiating large position up at these levels).

SWSI looks like a real promising oil play.  Again, I don’t like initiating positions in stocks that break out without first forming some kind of handle as is the case here.  I’m looking for a quiet return to around 30 as an opportunity to possibly initiate a position.

Same situation here as with SWSI.. break out without handle.  I’m wating for a return to the break out point around 42.50.

Another break out without a handle here too with a nice high volume gap up (very bullish action).  Again, I would look to play this two ways, depeding on what the stock gave me.  One way is too pick up shares on a return to the breakout point around 41 or you could pick up a small position on a break out from current consolidation.  I don’t think this drops to 41 but continues to consolidate in a bullish pennant like formation and breaks out from there.   Certainly one to keep an eye on.

Nothing too fancy here.. just looking for a high volume move above the handle.

STRL has carved out a base that is a bit on the sloppy side in the left side but the action has been impressive recently with buy volume picking up.  It’s currently carving out a handle formation.  Should the stock blow through 25 with volume, it may offer a nice opportunity.

RIMM, the former high flyer held down by legal troubles is beginning to emerge again and is well positioned for a strong breakout. 

I’m not a big fan of the insurance stocks, but TWGP is one of the best and recently made another all time high.  Having never formed a significant handle during its runup over the past month, it is now digesting those gains in a quiet, constructive manner.

When I drew up this chart last night I though the stock would settle in aroun 20 before moving higher, but today the stock is getting hit a bit hard and appears headed for the next level of support around the 50 day moving average (18.50 – 19).  The action in this stock is a bit sloppier than I prefer, but CLRK is an outstanding company in an emerging field (LED lighting).. one to keep an eye on.