MDA Breakout Stocks Week 42 – October 2022

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 7 years. This subset of the different portfolios I regularly analyze has now exceeded 280 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. 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 exchange-traded fund (“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 Momentum Gauges®, economic events, and weekly market outlook are now separated into a weekly articles here which also includes my Technical Market update videos. My forecast continues with correctly calling September the worst month of the year on average since 1927 not including the scheduled 2x Fed quantitative tightening. The S&P 500 touched on my long term target at 3500 and will continue to test the lower support of the long term positive channel from 2009. October follows the forecast with strong similarities to a very negative October back in 2018, our last year with Fed QT.

Consider the AAPL, TMV, UTSL, FNGU charts as excellent validating indicators to the Momentum Gauges:

Momentum Gauges® Stoplight ahead of Week 42. The daily momentum gauges are negative from Sept. 13th as well as the weekly and monthly gauges remain negative into October. In these conditions cash or bear funds are the safest trade.

As a reminder much greater detail is covered live every day with current charts and signals. If you are not reviewing the latest charts and updates you could be missing out. The signals continue bearish through October after negative September signals that averages the worst month of the year since 1927. The Active ETF portfolio frequently moves to cash (CLTL) over the weekend to minimize risk in these 3x leveraged funds. The ETF models have been very active in bear funds with the current returns by model:

Weekly Market Momentum Gauges continue negative through a 7th week on the 2-year chart shown below from the 2020 Covid correction.

Current Returns

So far YTD 2022 there are 108 picks in 41 weeks beating the S&P 500. 80 picks are beating the S&P 500 by over 10%+ in double digits. Leading MDA gainers include MNRL +28.89%, RES +73.0%, TDW +104.94%, CLFD +52.86%, VRDN +62.81%, WVE +71.62%, TA +45.93%.

Despite such high negative momentum conditions all year, 40 picks in 41 weeks have gained over 10% in less than a week. Additionally, 89 picks in 41 weeks have gained over 5% in less than a week in these high frequency breakout selections. These are highly significant statistical results that are further improved by following the Momentum Gauge signals.

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

2022 First-Half Weekly Return Results

First half returns with all the weekly returns available on the V&M Dashboard

Red weekly color indicates negative Market Momentum Gauge signals. MDA breakout selections outperform when the market signal is positive and daily negative values are below 40 level.

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.

Longer term, many of these selections join the V&M Multibagger list now at 102 weekly picks with over 100%+ gains, 39 picks over 200%+, 18 picks over 500%+ and 12 picks with over 1000%+ gains since January 2019 such as:

• Celsius Holdings (CELH) +1,659.15%
• Enphase Energy (ENPH) +1,619.96%
• Northern Oil and Gas (NOG) +1,093.26%
• Intrepid Potash (IPI) +1,061.26%
• 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 42 – 2022 Breakout Stocks For Next Week Are:

The picks for next week consist of 2 Consumer Cyclical, 1 Real Estate, 1 Technology sector stocks. No sectors were positive on the gauges at the close Friday. 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. Arhaus Inc. (ARHS) – Consumer Cyclical / Home Improvement Retail
2. CTO Realty Growth (CTO) – Real Estate / Development

Arhaus Inc. – Consumer Cyclical / Home Improvement Retail

Price Target: $9.50/share (See my FAQ #20 on price targets)

Click to enlarge

Arhaus, Inc. operates as a lifestyle brand and premium retailer in the home furnishings market. It provides merchandise assortments across various categories, including furniture, lighting, textiles, decor, and outdoor. The company’s furniture products comprise bedroom, dining room, living room, and home office furnishings, which includes sofas, dining tables and chairs, accent chairs, console and coffee tables, beds, headboards, dressers, desks, bookcases and modular storage, etc.; and outdoor products include outdoor dining tables, chairs, chaises and other furniture, lighting, textiles, decor, umbrellas, and fire pits.

(Source: Company Resources)

CTO Realty Growth – Real Estate / Development

Price Target: $22.00/share (See my FAQ #20 on price targets)

Click to enlarge

CTO Realty Growth, Inc. is a Florida-based publicly traded real estate company, which owns income properties comprised of approximately 2.4 million square feet in diversified markets in the United States and an approximately 23.5% interest in Alpine Income Property Trust, Inc.

(Source: Company Resources)

Top Dow 30 Stocks To Watch For Week 42

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 Dow index is in technical breakdown condition with 13 out of 30 stocks within 5% of new 52 week lows. The most recent picks of weekly Dow selections in pairs for the last 5 weeks:

Symbol	Company	Current % return from selection Week
MRK	Merck & Co.	+5.32%
(CVX)	Chevron Corp.	+0.07%
(MRK)	Merck & Co.	+7.04%
(TRV)	Travelers Companies	+6.59%
(MMM)	3M Company	+0.57%
MCD	McDonald’s Corp.	-1.13%
(JNJ)	Johnson & Johnson	-0.72%
(MCD)	McDonald’s Corp.	-3.67%
(MSFT)	Microsoft Corp.	-13.57%
(CAT)	Caterpillar Inc.	-5.96%

Click to enlarge

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 down -5.54%
• January portfolio beating S&P 500 by +33.00% YTD.

Positive Forensic –

• July midyear down -11.93%
• January Positive Forensic beating S&P 500 by +4.24% YTD.

Negative Forensic –

• July midyear up +6.23%
• January Negative Forensic beating S&P 500 by +27.18% YTD

Growth & Dividend Mega cap breakouts –

• July midyear down -6.02%
• January portfolio beating S&P 500 by +11.71% 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 -64.07% YTD, Tiger Global Management -52% YTD.

The Dow Pick For Next Week Is:

JPMorgan Chase & Co. (JPM)

JPMorgan beat on Q3 earnings on Oct. 14th and indicators are turning more positive for breakout conditions potentially above the negative channel from January. Corporate buybacks remain strong and valuations are good 8.9x earnings and 1.3x book. Watch for net MFI inflows to continue to increase toward a retest of $120/share.

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. 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. New mid-year value portfolios are up sharply to start the next long term buy/hold period.

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

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

JD Henning, PhD, MBA, CFE, CAMS