MDA Breakout Stocks Week 51 – December 2022: Short-Term Picks To Give You An Edge

Note: We are coming to the end of an extremely difficult trading year that has given all my models their most challenging tests ever. The schedule of reports and analysis for next year as well as the YTD performance through the first 10 months of the year are here for your review. Final reports will go out the end of December:

• Article Schedule for 2022/2023
• The Best Portfolio Models since 2007 compared to Value & Momentum Portfolio Models YTD

Introduction

The Weekly Breakout Forecast continues my doctoral research analysis on MDA breakout selections over more than 7 years. This high frequency breakout subset of the different portfolios I regularly analyze has now reached 290 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, and 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 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 Market and S&P 500 Momentum Gauges® continue negative from the December 5th signal. The Weekly Market Gauges are two weeks negative after the longest positive signal since the November 2021 topping signal. Economic data remains weak and indicators show early moves in the next leg lower with increasing QT activity. More of these incredible charts are detailed here and in the chat rooms. A retest of 3900 key support on the S&P 500 (SPY) followed the prior forecast and is headed toward prior 2022 lows.

I have been expecting the S&P 500 market pattern to follow with another leg lower as shown above. The timing is consistent with the VIX reaching the lowest levels since the April and August market peaks. As I have said for weeks, the market reversal may also coincide with the next FOMC meeting and rate hike decision on December 13th.

We are still in a pattern of bearish rallies in a longer negative channel from November 2021. There are strong similarities to the volatility and patterns of 2018 and 2008 with investors very cautious. Follow the Momentum Gauges and be ready for more swift changes.

Morgan Stanley chief strategist says the bear rally has ended and the next leg lower has begun: “The Perfect Bull Trap”: Mike Wilson Turns Bearish Again, Says The Rally Is Over

JPMorgan says don’t buy here, you should be selling into S&P 500 above 3900. “We See More Selling Into Strength Here”: Why JPM’s Trading Desk Isn’t Buying This Rally

JPMorgan has changed from a bullish outlook to a base case of recession into 2023: JPM Makes 2023 Recession Its Base Case, Expects Million Jobs Lost By Mid-2024

Momentum Gauges® Stoplight ahead of Week 51. All the Momentum Gauge trackers have turned negative starting December 5th after the longest positive streak since November 2021. Even the monthly gauges are negative after 2 months positive. Continue with caution into the new year.

The first stage of weekly and monthly sector gauges have been released on the automated Momentum Gauge website to the public!

As a reminder much greater detail is covered live every day in the Chat Rooms with current charts and signals. If you are not reviewing the latest charts and updates you could be missing out.

Weekly Momentum Gauges continue negative after the longest positive signal for 2022 of 6 consecutive weeks. Negative momentum is at the highest levels since September.

Current Returns

So far YTD 2022 there are 125 MDA picks in 50 weeks beating the S&P 500. 106 picks are beating the S&P 500 by over 10%+ in double digits. Leading MDA gainers include (TUSK) +61.3%, (CLFD) +60.0%, (FUTU) 52.2%, (MNRL) +50.6%, (VIPS) +53.3%, (RES) +83.3%, (TDW) +164.3%, (ZYME) +43.7%, (VRDN) +116.5%, (ZYXI) +68.6%.

Despite such high negative momentum conditions all year, 53 picks in 50 weeks have gained at least 9.9% in less than a week. Additionally, 110 picks in 50 weeks have gained over 5% in less than a week in these high frequency breakout selections, despite many shortened holiday weeks.

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

These are highly significant statistical results that are further improved by following the Momentum Gauge signals with only 14 positive trading weeks this year. Worst case minimal returns following the MG trading signals are beating the S&P 500 YTD by +20.6%.

Leveraging The Momentum Gauges With ETFs

In addition to timing MDA breakout stock picks for the best returns, the gauges are used for live ETF bull/bear timing signals with strong results.

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.

V&M Multibagger List

Longer term many of these selections join the V&M Multibagger list now at 111 weekly picks with over 100%+ gains, 53 picks over 200%+, 18 picks over 500%+ and 11 picks with over 1000%+ gains since January 2019 such as:

• Celsius Holdings (CELH) +2,214.9%
• Enphase Energy (ENPH) +2,093.7%
• Northern Oil and Gas (NOG) +1,088.4%
• 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 51 – 2022 Breakout Stocks for next week are:

The picks for next week consist of 2 Consumer Cyclical, 1 Healthcare, and 1 Consumer Defensive sector stocks. These selections are heavily in China stocks based on record QE activity to support their markets. 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. New Oriental Education & Technology Group (EDU) – Consumer Defensive / Education and Training Services
2. CarParts.com (PRTS) – Consumer Cyclical / Internet Retail

New Oriental Education & Technology Group – Consumer Defensive / Education and Training Services

Price Target: $40/share (Analyst Consensus + Technical See my FAQ #20)

Click to enlarge

(Source: Company Resources)

New Oriental Education & Technology Group Inc. provides private educational services under the New Oriental brand in the People’s Republic of China. The company operates through Educational Services and Test Preparation Courses; Online Education and Other Services; Overseas Study Consulting Services; and Others segments. It offers test preparation courses to students taking language and entrance exams used by educational institutions in the United States, the Commonwealth countries, and the People’s Republic of China.

CarParts.com – Consumer Cyclical / Internet Retail

Price Target: $9/share (Analyst Consensus + Technical See my FAQ #20)

Click to enlarge

(Source: Company Resources)

CarParts.com, Inc., together with its subsidiaries, operates as an online provider of aftermarket auto parts and accessories in the United States and the Philippines. It offers replacement parts, such as parts for the exterior of an automobile; mirror products; engine and chassis components, as well as other mechanical and electrical parts; and performance parts and accessories to individual consumers through its network of e-commerce websites and online marketplaces.

(Source: StockRover)

Top Dow 30 Stocks to Watch for Week 51

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 most recent picks of weekly Dow selections in pairs for the last 5 weeks:

Symbol	Company	Current % return from selection Week
(MCD)	McDonald’s	-2.18%
MRK	Merck & Co.	+0.39%
V	Visa Inc.	-4.95%
(MRK)	Merck & Co.	-0.76%
V	Visa Inc.	-3.23%
(VZ)	Verizon	-4.87%
(HON)	Honeywell International	-2.23%
(V)	Visa Inc.	-1.85%
(CVX)	Chevron Corp.	-8.70%
(DOW)	Dow Inc.	-4.10%

Click to enlarge

Conditions are very negative for the 30 stocks on the DJIA as all the Momentum Gauges have turned negative in December.

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 up +4.07%
• January portfolio beating S&P 500 by +25.83% YTD.

Positive Forensic –

• July midyear down -14.77%
• January Positive Forensic beating S&P 500 by +5.17% YTD.

Negative Forensic –

• July midyear down -27.12%
• January Negative Forensic beating S&P 500 by +24.29% YTD

Growth & Dividend Mega cap breakouts –

• July midyear down -0.32% (not including high dividends)
• January portfolio beating S&P 500 by +13.60% 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 -64.84% YTD, Tiger Global Management -58% YTD.

The Dow pick for next week is:

Caterpillar Inc. (CAT)

Caterpillar is one of the strongest Dow stocks at the moment with very high positive volume like October levels. Indicators are setting up for breakout conditions with strong net MFI inflows. Analysts consensus target is $225/share from October, but the most recent analyst upgrade on December 9th has a $264/share Outperform target.

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, record inflation and Fed tightening intervention. New mid-year value portfolios are again leading the major indices 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