PDD - June MDA Breakout Stocks/ETFs Week 22 - 2023: High-Frequency Gainers To Give You An Edge

2023-05-28 10:10:25 ET

Summary

• Two new Breakout Stocks for Week 22 with better than 10% short-term upside, ETF updates and one Dow 30 pick. Average cumulative returns for 2023 are +79.6% YTD.
• Last week we had peak gains in GLOB +15.9%, RBBN +5.6% and ATEX +5.7%. The Active ETF portfolio continues with YTD gains at +5.64%.
• The streak of weekly picks gaining over 10% in less than a week has reached 249 out of 313 trading weeks (79.5%) not considering multiple gainers or negative signals.
• Annual returns are simulated by adding 52 weekly selections though they could be compounded weekly. Since inception over 450 stock picks have gained over 10% in less than a week.
• The MDA breakout picks continue to beat the S&P 500 into 7 consecutive years now delivering +789.0% compound returns through 2023 and a CAGR +33.24%.

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 8 years. This high frequency breakout subset of the different portfolios I regularly analyze has now exceeded 300 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 6+ 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 using the MDA methodology, but I highly recommend the monthly Growth & Dividend mega cap breakout portfolios if you are looking for larger cap selections beyond only 30 Dow stocks.

As long term investors know , you can compound $10,000 into $1 million with 10% annual returns in less than 50 years. This model serves to increase the rate of 10% breakouts into 52 weekly intervals instead of years. In 2022, the worst market since 2008: 113 MDA picks gained over 5%, 52 picks over 10%, 22 picks over 15%, and 13 picks over 20% in less than week.

2023 Market Outlook

The Fed has delivered its 10th consecutive rate hike in the fastest series of increases since 1977. After PCE inflation unexpectedly rose this week, the odds of an 11th hike in June has jumped to 66.5% on the CME FedWatch Tool . Historically this had led to a market correction after every rate hiking cycle in US history. The largest QT program in history is still ongoing to reduce the Fed's balance sheet at the fastest rate ever conducted with target levels of -$95 billion per month.

Despite the largest number of bank failures this year since 2008 and most bankruptcy filings since 2010 , we are still waiting for the S&P 500 to make even a 3rd daily move this year greater than +/- 2%.

I was on a recent Podcast hosted by Daniel Snyder of Seeking Alpha discussing this current market anomaly. My theory, based on the patterns and incredible events of 2018, 2020, and 2022 with low subsequent year volatility, is that after the most painful years investors crowd into the largest S&P 500 index stocks for safety. This crowding is contributing to extremely low VIX and low volatility of the "Market" index of 500 stocks. while omitting the 7,000+ smaller cap stocks that are lagging this year and not in the S&P 500 index for VIX measures.

Watch the Mega caps closely! If they breakdown the market will breakdown sharply. The largest 5 mega cap stocks are testing the peak levels back to 2020 and for 2022 highs relative to the rest of the S&P 1000 stocks. One analyst said that 7 stocks account for 90% of the gains in the S&P 500 this year.

Momentum Gauges Dashboard for Week 22

Market daily gauges are positive ahead of Week 22 as well as the weekly gauges. The S&P 500 gauges are negative but nearly even. The DJIA declined -1% this week along with the Russell 2000, while the S&P 500 gained +0.32%. Large market distortion is coming from the most highly weighted mega cap stocks that continue sharply higher while the broad market declines.

• Guide: Maximizing Market Returns With The Automated Momentum Gauges

Momentum continues with high chop from sector swings and concentration in the mega cap market distortions. We continue to see frequent reversals and short holding periods, particularly small cap banks and biotechs. More about this in the Guide above.

Why do finance companies admit that "timing is everything," but when it comes to investing your money the majority tell their clients to "just buy/hold and try to ignore the downturns?" I submit most investors would rely on timing signals, but without a model like the gauges they are forced to try to keep their clients in buy/hold positions for 24 months with no gains, or worse.

If timing helps you gain just 1% a week, you will significantly outperform all the long term market averages.

Long time members know, we can consistently beat the markets by avoiding the most negative weeks and loading up during the most positive signals. Only the financial industry has incentives to make you to stay in the markets year round.

My strategy for 2023 is to stay generally bearish while adjusting for large bear bounces in anticipation of strong similarities to the August topping pattern. Economic data, inflation, manufacturing productivity, home sales, and the latest banking crisis continue to show recessionary weakness into rising interest rate hikes at the highest levels since Sep 2007.

Mid-year 2023 is where things may get interesting with potential for a Fed pivot. Dip-buyers will continue to try to pull this anticipated pivot event forward in time extending high market volatility while the Fed hikes rates.

In just a few weeks I plan to leverage strong results from the new June Russell Reconstitution anomaly we found last year that is actively tracked on the dashboard: FTSE Russell Reconstitution Anomaly Study - Strong +22.7% Difference After 5 Months

Some of my forecast articles for 2023 are here for your benefit.

• Forecasting The S&P 500 For 2023: Year Of The Fed-Pivot And More Record Volatility ( SP500 )
• My Response To The SA Roundtable: 2023 Technical Analysis / Quantitative Look Ahead
• Value, Momentum Breakout View: Debt Ceiling 'Extraordinary Measures' And Fed's QT Program

Weekly Breakout Returns

The ongoing competition between the Bounce/Lag Momentum model (from Prof Grant Henning, PhD Statistics) and MDA Breakout picks (from JD Henning, PhD Finance) are shown below with / without using the Momentum Gauge trading signal. The per-week returns equalize the comparison where there were only 16 positive trading weeks last year using the MDA trading signal (negative values below 40). Both models are outperforming last year's weekly returns.

For 2022, the worst market since 2008: 113 MDA picks gained over 5%, 52 picks over 10%, 22 picks over 15%, and 13 picks over 20% in less than week . These are statistically significant high frequency breakout results despite many shortened holiday weeks.

Following the Momentum Gauge signals for 2023, the MDA Breakout picks are up +61.53% average cumulative return with a worst case minimal return +11.42%. We continue in a second consecutive positive weekly signal.

V&M Multibagger List

While not the purpose of my model, longer term (using the trading video in FAQ #20) many of these selections may join the V&M Multibagger list now at 131 weekly picks with over 100%+ gains, 54 picks over 200%+, 15 picks over 500%+ and 7 weekly picks with over 1000%+ gains since January 2019 such as:

• Celsius Holdings ( CELH ) +2,701.5%
• Alexco Resources AXU +1,221.3%
• Northern Oil & Gas ( NOG ) +1,067.8%
• Enphase Energy ( ENPH ) +1,1074.0%
• Trillium Therapeutics TRIL +1,008.7%

More than 450 stocks have gained over 10% in less than a week since this MDA testing began in 2017. Frequency comparison charts are 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

Historical Performance Measurements

Historical MDA Breakout minimal buy/hold (worst case) returns have a compound average growth rate of 33.24% and cumulative minimum returns of +789.0% from 2017. 2023 represents a partial year. Last year the minimal cumulative returns for 2022 were -0.21%, average cumulative returns were +67.05%, and the best case cumulative returns were +360.25%. The chart reflects the most conservative measurements adding each 52 weekly return in an annual portfolio simulation, though each weekly result could be compounded weekly as separate portfolios.

The Week 22 - 2023 Breakout Stocks for next week are:

The picks for next week consist of 1 Energy, 1 Financial, 1 Healthcare and Consumer Cyclical sector stocks. These selections are released in advance to members every Friday with current gains shown. 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 -- readers are cautioned to follow the Momentum Gauges for the best results.

1. Noble Corp. ( NE ) - Energy / Oil & Gas Drilling
2. PDD Holdings ( PDD ) - Consumer Cyclical / Internet Retail

Noble Corp. - Energy / Oil & Gas Drilling

Price Target: $50.00/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

Noble Corporation plc operates as an offshore drilling contractor for the oil and gas industry worldwide. The company provides contract drilling services to the oil and gas industry through its fleet of mobile offshore drilling units. It operates drilling rigs consisting of floaters and jackups.

PDD Holdings - Consumer Cyclical / Internet Retail

Price Target: $105.00/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

PDD Holdings Inc., a multinational commerce group, owns and operates a portfolio of businesses. It operates Pinduoduo, an e-commerce platform that offers products in various categories, including agricultural produce, apparel, shoes, bags, mother and childcare products, food and beverage, electronic appliances, furniture and household goods, cosmetics and other personal care, sports and fitness items and auto accessories; and Temu, an online marketplace.

Top Dow 30 Stocks to Watch for Week 22

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. Third, the 30 Dow stocks declined -1% this week and continue among the worst performing index YTD as crowding into Tech / Nasdaq continues. The most recent picks of weekly Dow selections in pairs for the last 5 weeks:

If you are looking for a much broader selection of large cap breakout stocks, I recommend these long term portfolios with consecutive years of beating the S&P 500 and already achieving double-digit returns. As regular readers know, in March we moved to negative signals on the gauges and have been in choppy low momentum conditions since. The returns shown below are the 2023 YTD gains before the Negative signal on March 7th. Showing again how much timing matters.

V&M Breakouts: Examining The Best Long-Term Value Portfolios For Turbulent Markets

New 2023 Piotroski-Graham enhanced value -

• New January portfolio +17.89% YTD
• 2022 January portfolio beat the S&P 500 by +32.54%

New 2023 Positive Forensic -

• New January portfolio +18.34% YTD
• January 2022 Positive Forensic beat S&P 500 by +6.59%

New 2023 Negative Forensic -

• New January portfolio +13.32% YTD
• January 2022 Negative Forensic beat S&P 500 by +22.18%

New Growth & Dividend Mega cap breakouts -

• New May mega cap portfolio has been released
• January 2022 portfolio beat S&P 500 by +13.91%

These long term portfolio selections have significantly outperformed many major hedge funds and all the hedge fund averages since inception.

The Dow pick for next week is:

International Business Machines Corp. ( IBM )

IBM is showing strong positive inflows and net institutional buying in the current quarter. This setup is strong for a move to $132/share prior resistance as inflows to technology stocks are outpacing the rest of the market.

Breakout ETF Portfolios

Technology Momentum Gauges continue for a second week to be the breakout sector. Negative gauges continue to drop sharply from the peak of negative momentum on May 4th. The ( TECL ) 3x Technology bull fund has gained +36.3% from May 4th and could continue toward January peak positive momentum levels at 180. The technology sector is the highest weighted and largest sector on the major market indices. As long as technology momentum increases it will benefit technology funds like ( SOXL ) 3x Semiconductor bull fund and the Mega cap (mostly tech funds) ( FNGU ) ( BULZ ).

The Active ETF portfolio is up +5.64% YTD through tremendous chop and record sector swings especially among the small cap biotech / banks stocks. I have been reluctant to load up on the Mega Cap Tech rally and it has cost me again this week while the broader market declines. I am still focused on the record high dollar giving a bearish market signal that has been extremely profitable for bear funds in Basic Materials like ( DUST ) -2x Gold bear fund.

The Bull/Bear Momentum Gauge ETF model year to date signal changes are shown below. These are member selected test funds and returns can be improved by following individual sector gauges (not just the broad gauge signal shown below) and gauges specific to each of the different types of funds. Be sure to read the Momentum Gauge guide for best results.

Returns shown here are for signals lasting longer than 3 days.

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.

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.

All the V&M portfolio models beat the market indices again last year with consistent outperformance of the major indices. All new portfolios are in a strong start to 2023 with many portfolios already in double-digit returns. Remember to follow the Momentum Gauges® in your investing decisions for the best results. YTD returns do not show the peak gains following the signals.

Portfolio returns for 2022

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

JD Henning, PhD, MBA, CFE, CAMS

For further details see:

June MDA Breakout Stocks/ETFs Week 22 - 2023: High-Frequency Gainers To Give You An Edge