BERZ - May MDA Breakout Stocks/ETFs Week 20 - 2023: High-Frequency Gainers To Give You An Edge

2023-05-14 07:47:41 ET

Summary

• Two new Breakout Stocks for Week 20 with better than 10% short-term upside, ETF updates, and two Dow 30 Picks. Average cumulative returns for 2023 are +68.3% YTD.
• The negative MG Signal continues, but peak gains were in COIN +14.4% and TLRY +7.1%. The Active ETF portfolio continues with YTD gains at +14.2%.
• The streak of weekly picks gaining over 10% in less than a week has reached 247 out of 311 trading weeks (79.4%) 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 for 7 consecutive years, delivering +766.6% compound returns through 2023 and a CAGR of +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 a week.

2023 Market Outlook

The Fed has delivered its 10th consecutive rate hike in the fastest series of increases since 1977. Historically, this had led to market corrections after every rate hiking cycle in US history. The largest QT program in history is also ongoing to reduce the Fed's balance sheet at the fastest rate ever conducted, with target levels of -$95 billion per month. These Federal Reserve liquidity tightening programs from March 2022 are beginning to impact banks and borrowers as credit gets harder and more expensive to obtain.

Despite the largest number of bank failures this year since 2008, 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 investors crowd into S&P 500 index stocks for safety, 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 break down, the market will break down sharply. The largest 5 mega cap stocks are testing peak levels back to 2020 and for 2022 relative to the rest of the S&P 1000 stocks.

Momentum Gauges Dashboard for Week 20

S&P 500 and Market gauges are negative ahead of Week 20 as well as the weekly gauges. The S&P 500 declined -0.37% this week for a second week in a row of declines despite the crowding into mega cap stocks.

• Guide: Maximizing Market Returns With The Automated Momentum Gauges

Momentum continues high negative above the midrange chop highlighted in yellow as the market tries to find direction with divided sectors. We are seeing frequent daily reversals in the FANG mega caps stocks. The US dollar broke out to March highs in the past week. 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 September 2007.

Mid-year 2023 is where things may get interesting with the 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 Professor Grant Henning, Ph.D. Statistics) and MDA Breakout picks (from JD Henning, Ph.D. 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.

Following the Momentum Gauge signals for 2023, the MDA Breakout picks are up +50.22% average cumulative return with a worst-case minimal return of +8.19%. We have not had a positive weekly signal since Week 16.

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 a 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 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 ) +2,662.3%.
• Alexco Resources AXU +1,076.5%.
• Northern Oil & Gas ( NOG ) +1,080.1%.
• Enphase Energy ( ENPH ) +1,111.5%.
• 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 20 - 2023 Breakout Stocks for next week are:

The picks for next week consist of 1 Utilities, 1 Financial, and 2 Healthcare 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. Annexon Inc ( ANNX ) - Healthcare / Biotechnology.
2. Fluence Energy ( FLNC ) - Utilities / Renewable.

Annexon Inc - Healthcare / Biotechnology

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

(Source: Company Resources)

Annexon, Inc., a clinical-stage biopharmaceutical company, discovers and develops therapeutics for autoimmune, neurodegenerative, and ophthalmic disorders. The company's C1q is an initiating molecule of the classical complement pathway that targets distinct disease processes, such as antibody-mediated autoimmune disease and complement-mediated neurodegeneration.

Fluence Energy - Utilities / Renewable

Price Target: $27.00/share (Analyst Consensus + Technical See my FAQ #20)

(Source: Company Resources)

Fluence Energy, Inc., through its subsidiaries, offers energy storage products and services, and artificial intelligence-enabled digital applications for renewables and storage applications in the Americas, Asia Pacific, Europe, Middle East, and Africa. The company sells energy storage products with integrated hardware, software, and digital intelligence.

Top Dow 30 Stocks to Watch for Week 20

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 Dow 30 is close to turning negative +0.46% YTD with another week of declines in the Negative MG signal. 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:

Salesforce ( CRM )

Salesforce is breaking out to new 52-week highs above key 200/share resistance. Valuations remain extremely high, but net MFI inflows continue strongly positive with analysts consensus price target at 221/share.

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 +14.18% YTD through tremendous chop and another negative week for the S&P 500. The strongest gains were in -3x Biotech bear ( LABD ) +4% and Mega cap bear funds ( FNGD ) +1.02% ( BERZ ) +0.85%. The VIX volatility funds were the biggest losers due to frequent daily reversals and still no S&P 500 breakdown. Majority of sectors continue negative on the Negative MG signal from April.

The Bull/Bear Momentum Gauge ETF model year to date signal changes 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 20 - 2023: High-Frequency Gainers To Give You An Edge