JPM - May MDA Breakout Stocks/ETFs Week 18: High-Frequency Gainers To Give You An Edge

2023-04-30 06:11:47 ET

Summary

• Two new Breakout Stocks for Week 18 with better than 10% short-term upside, ETF updates and two Dow 30 Picks. Average cumulative returns for 2023 are +58.9% YTD.
• Negative MG Signal continues, but peak gains were in ANNX +10.2% and ONON +5%. The Active ETF portfolio continues with YTD gains at +13.0%.
• The streak of weekly picks gaining over 10% in less than a week has reached 245 out of 309 trading weeks (79.2%) 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, delivering +766.6% compound returns through 2023 and a CAGR +32.55%.

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

Ongoing record market intervention from the Fed and Treasury including over $400 billion in emergency loans for banks are signaling that the Fed may have to pivot from QT and rate hikes sooner than planned. Investors currently see a better than 90% probability of another 25bps rate hike for the 10th consecutive hike on May 3rd from the Federal Reserve: Fed funds rate after 9 hikes from March of 2022

We are still waiting for the S&P 500 to make even a 3rd daily move this year greater than +/- 2%.

This past week I was on a 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 investors crowd into S&P 500 index stocks, after the most painful years. 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 break down sharply. The Technology sector gauges remain a key bellwether of the mega cap momentum strength.

Momentum Gauges Dashboard for Week 18

S&P 500 and Market gauges are negative ahead of Week 18. Sectors remain mixed with frequent reversals creating chop for the indices. Apple (AAPL) earnings next week along with the Fed's 10th consecutive rate hike will be key impact on the markets.

• Guide: Maximizing Market Returns With The Automated Momentum Gauges

Momentum has turned less negative in the noisy chop highlighted in yellow as the market tries to find direction with divided sectors. The extreme negative values remain higher than the extreme positive values shown in the gauges. 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. Mid-year I also plan to leverage strong results from a 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.

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 124 weekly picks with over 100%+ gains, 50 picks over 200%+, 16 picks over 500%+ and 7 weekly picks with over 1000%+ gains since January 2019 such as:

• Celsius Holdings ( CELH ) +1,933.4%
• Alexco Resources AXU +1,302.7%
• Northern Oil and Gas ( NOG ) +1,127.3%
• Enphase Energy ( ENPH ) +1,087.3%
• 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 32.53% and cumulative minimum returns of +764.1% 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 18 - 2023 Breakout Stocks for next week are:

The picks for next week consist of 1 Basic Material, 1 Financial, 1 Healthcare, and 1 Energy 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. bluebird bio ( BLUE ) - Healthcare / Biotechnology
2. Expro Group Holdings ( XPRO ) - Energy / Oil & Gas Equipment & Services

bluebird bio - Healthcare / Biotechnology

Price Target: $6.00/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

bluebird bio, Inc., a biotechnology company, researches, develops, and commercializes gene therapies for severe genetic diseases. Its product candidates for severe genetic diseases include ZYNTEGLO (betibeglogene autotemcel) for the treatment of transfusion-dependent ß-thalassemia; lovotibeglogene autotemcel for the treatment of sickle cell disease ((SCD)); and SKYSONA (elivaldogene autotemcel) to treat cerebral adrenoleukodystrophy. The company's clinical development programs include HGB-205, HGB-206, and HGB-210 to evaluate the safety and efficacy of lovo-cel in the treatment of patients with SCD

Expro Group Holdings - Energy / Oil & Gas Equipment & Services

Price Target: $7.50/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

Expro Group Holdings N.V. engages in the provision of energy services in North and Latin America, Europe and Sub-Saharan Africa, the Middle East and North Africa, and the Asia-Pacific. The company provides well construction services, such as technology solutions in drilling, tubular running services, and cementing and tubulars; and well management services, including well flow management, subsea well access, and well intervention and integrity services.

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. 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 will be released for members this weekend
• 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:

Honeywell International Inc. ( HON )

Honeywell reported solid earnings and revenue beats for Q1 this past week. The technical price pattern is setting up with a bullish inverse Head/Shoulder pattern for breakout after a steady channel of declines since December. Analysts' consensus price target is $218/share with institutional net buying.

Breakout ETF Portfolios

The Momentum Gauge timing model changes between bull/bear funds following the signals at the start of the next day. Members can outperform these returns following early signals and trading on the day of the signals before the close. The Active ETF portfolio is up +13.04% YTD through tremendous chop last week especially from large mega cap earnings reactions in MSFT, META, and AMZN. Active portfolio is in cash ahead of Fed rate decision and AAPL earnings.

Year to date signal changes on the Bull/Bear Momentum Gauge ETF model are shown below. 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:

May MDA Breakout Stocks/ETFs Week 18: High-Frequency Gainers To Give You An Edge