Newsletter Watch: Breakout buys

Leo Fasciocco, publisher of the Ticker Tape Digest, has an intriguing approach to stock selection. Like many advisors, he focuses on a company’s operations, earnings and sales, growth prospects, institutional ownership, insider buying and other fundamentals.

However, a unique aspect of his report is that he only recommends “breakout” stocks. For a stock to make it on to his “buy” list, it must either have broken above a technical resistance level, or be under strong accumulation and appear poised for an expected breakout.

He says that he expects these breakout stocks to be among the best performers during bull markets and strong market rallies. He does, however, caution that his strategy is most suitable for aggressive investors.

Using the same approach, the advisor also recommends short sales; in those cases, he is looking for stocks that are breaking below previous support lines. Overall, Fasciocco screens some 8,000+ stocks each day to find his long and short picks.

Currently, he rates the market’s short-term outlook (based on daily and weekly charts) as bullish, but considers the long-term environment for stocks to be neutral. As such, he says, “Bulls should be very alert now.”

Meanwhile, two small-cap stocks have recently shown up among his buys: Flow International Corporation (Nasdaq: FLOW), with a market cap of $355 million and Exponent, Inc. (Nasdaq: EXPO), which has a market cap of $448 million.

Flow International, he says, makes ultra high-pressure water jet systems. These systems, he explains, pressurize water up to 100,000 PSI and are used to cut and prepare surfaces in industrial applications, including aerospace, automotive and road maintenance.

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