Picking a winning trade on a consistent basis is not simply a stroke of luck. It’s the result of calculated screening, planning, and deliberation.
With this in mind, we have started a new weekly series on our top 10 stocks to watch this week — stocks that look poised for a possible breakout in the coming days. Traders should add these stocks to their watchlist now.
The Top 10 Stocks to Watch This Week for Possible Breakouts
| Sl # | Name of the Stock | Stock Ticker | Last Close | Buy Level(s) | Reason |
| 1 | NRx Pharmaceuticals, Inc. | NASDAQ: NRXP | $6.75 | $10.80 | Falling Wedge Pattern Breakout |
| 2 | Catalent, Inc. | NYSE: CTLT | $132.31 | $139.00 | Flag Pattern |
| 3 | The Clorox Company | NYSE: CLX | $174.21 | $178.00 | Downtrend Channel Breakout |
| 4 | RLX Technology Inc. | NYSE: RLX | $5.51 | $7.00 | Falling Wedge Pattern Breakout |
| 5 | Petroleo Brasileiro S.A. – Petrobras | NYSE: PBR | $10.47 | $11.80 | Symmetrical Triangle Pattern |
| 6 | 180 Life Sciences Corp. | NASDAQ: ATNF | $5.41 | $6.70 | Falling Wedge Pattern Breakout |
| 7 | Cars.com Inc. | NYSE: CARS | $16.12 | $16.20 | Consolidation Area Breakout |
| 8 | Logitech International S.A. | NASDAQ: LOGI | $84.77 | $90.50 | Falling Wedge Pattern Breakout |
| 9 | Danaher Corporation | NYSE: DHR | $323.96 | $327.00 | Flag Pattern Breakout |
| 10 | Zoom Video Communications, Inc. | NASDAQ: ZM | $220.21 | $274.00 | Falling Wedge Pattern |
Important: Typically, these trades offer a risk: reward ratio of 1:2 or 1:3 in the next 6 months, which implies 2x to 3x rewards when compared to risks. So, be sure to set your stop-loss levels and target prices accordingly to manage your risk. In addition, these trade ideas are triggered using daily closing prices, not intra-day pricing. So, if you participate in these trades, make sure that you only buy the stock once its daily close is above the recommended price level.
That said, here are the top 10 stocks to watch for a breakout, in no particular order.
#1 NRx Pharmaceuticals, Inc. (NASDAQ: NRXP)
Sector: Healthcare | Biotechnology
Reason: Falling Wedge Pattern Breakout
A falling wedge pattern is formed by joining two downward-sloping, converging trendlines having a contracting range. The pattern appears to be wide at the top and continues to contract as prices fall. A breakout from a falling wedge pattern can indicate either reversal or continuation depending on where the pattern appeared in the trend.
A stock that has broken out of a falling wedge pattern would have gained momentum and would have the potential to move higher.
Buy Level(s): The stock has currently broken out of a falling wedge pattern. However, the ideal buy level for NRXP is above the nearest resistance level of $10.80. This is marked in the chart below as a green color dotted line.
Daily chart – NRXP
NRXP – Falling Wedge Pattern Breakout
#2 Catalent, Inc. (NYSE: CTLT)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Formation of a Flag Pattern
A flag pattern is a short-term continuation pattern that marks a small consolidation before the previous move resumes. The pattern is formed when the market consolidates in a narrow range after a sharp move. For a stock in an uptrend, a breakout from this pattern is typically a strong bullish indication.
Buy Level(s): The ideal buy level for CTLT is if the stock breaks out of the flag pattern, at around $139.00. This is marked in the chart below as a green color dotted line.
Daily chart – CTLT
CTLT – Flag Pattern
#3 The Clorox Company (NYSE: CLX)
Sector: Consumer Defensive | Household & Personal Products
Reason: Downtrend Channel Breakout
A downtrend or descending channel is the price action contained between downward sloping parallel lines. It is formed by two lines that are drawn by connecting the lower highs and lower lows of a stock’s price. Even though this is typically a bearish pattern, a breakout from the upper rail of this pattern is considered a good bullish indication.
Buy Level(s): The daily chart shows that the stock has currently broken out of a downtrend channel. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for CLX is if the stock has a daily close above $178.00. This is marked in the chart below as a green color dotted line.
Daily chart – CLX
CLX – Downtrend Channel Breakout
#4 RLX Technology Inc. (NYSE: RLX)
Sector: Consumer Defensive | Tobacco
Reason: Falling Wedge Pattern Breakout
A falling wedge pattern is formed by joining two downward-sloping, converging trendlines having a contracting range. The pattern appears to be wide at the top and continues to contract as prices fall. A breakout from a falling wedge pattern can indicate either reversal or continuation depending on where the pattern appeared in the trend.
A stock that has broken out of a falling wedge pattern would have gained momentum and would have the potential to move higher.
Buy Level(s): The stock has currently broken out of a falling wedge pattern. However, the ideal buy level for RLX is above the nearest resistance level of $7.00. This is marked in the chart below as a green color dotted line.
Daily chart – RLX
RLX – Falling Wedge Pattern Breakout
#5 Petroleo Brasileiro S.A. – Petrobras (NYSE: PBR)
Sector: Energy | Oil & Gas Integrated
Reason: Formation of a Symmetrical Triangle Pattern
A symmetrical triangle is a chart pattern formed by two converging trend lines connecting a series of sequential peaks and troughs. These two lines result in the formation of a triangle that appears to be symmetrical.
A symmetrical triangle pattern is usually formed when there is an indecision in the price movements and there is uncertainty among the buyers and sellers. This chart pattern represents a period of consolidation before the price breaks out or breaks down. In case a breakout occurs from the upper trend line, it is a strong bullish indication as it signifies the start of a new bullish trend.
Buy Level(s): The ideal buy level for PBR is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $11.80. This is marked in the chart below as a green color dotted line.
Daily chart – PBR
PBR – Symmetrical Triangle Pattern
#6 180 Life Sciences Corp. (NASDAQ: ATNF)
Sector: Healthcare | Biotechnology
Reason: Falling Wedge Pattern Breakout
A falling wedge pattern is formed by joining two downward-sloping, converging trendlines having a contracting range. The pattern appears to be wide at the top and continues to contract as prices fall. A breakout from a falling wedge pattern can indicate either reversal or continuation depending on where the pattern appeared in the trend.
A stock that has broken out of a falling wedge pattern would have gained momentum and would have the potential to move higher.
Buy Level(s): The stock has currently broken out of a falling wedge pattern. However, the ideal buy level for ATNF is above the nearest resistance level of $6.70. This is marked in the chart below as a green color dotted line.
Daily chart – ATNF
ATNF – Falling Wedge Pattern Breakout
#7 Cars.com Inc. (NYSE: CARS)
Sector: Consumer Cyclical | Auto & Truck Dealerships
Reason: Breakout From a Consolidation Area in the Daily Chart
A Consolidation Area is a price action contained between two parallel lines. It is formed by a lower line that connects the lows, and an upper line that joins the highs. A stock usually trades between the two lines of the consolidation area before finally breaking out from the upper rail.
Buy Level(s): Although the stock has currently broken out of a consolidation area, the ideal buy level for CARS is above the near-term resistance area, which translates to a price of around $16.20. This is marked in the chart below as a green color dotted line.
Daily chart – CARS
CARS – Consolidation Area Breakout
#8 Logitech International S.A. (NASDAQ: LOGI)
Sector: Technology | Computer Hardware
Reason: Falling Wedge Pattern Breakout
A falling wedge pattern is formed by joining two downward-sloping, converging trendlines having a contracting range. The pattern appears to be wide at the top and continues to contract as prices fall. A breakout from a falling wedge pattern can indicate either reversal or continuation depending on where the pattern appeared in the trend.
A stock that has broken out of a falling wedge pattern would have gained momentum and would have the potential to move higher.
Buy Level(s): The stock has currently broken out of a falling wedge pattern. However, the ideal buy level for LOGI is above the nearest resistance level of $90.50. This is marked in the chart below as a green color dotted line.
Daily chart – LOGI
LOGI – Falling Wedge Pattern Breakout
#9 Danaher Corporation (NYSE: DHR)
Sector: Healthcare | Diagnostics & Research
Reason: Breakout From a Flag Pattern
A flag pattern is a short-term continuation pattern that marks a small consolidation before the previous move resumes. The pattern is formed when the market consolidates in a narrow range after a sharp move. For a stock in an uptrend, a breakout from this pattern is typically a strong bullish indication.
Buy Level(s): Although the stock has currently broken out of the flag pattern, the ideal buy level for DHR is above the near-term resistance level of $327.00. This is marked in the chart below as a green color dotted line.
Daily chart – DHR
DHR – Flag Pattern Breakout
#10 Zoom Video Communications, Inc. (NASDAQ: ZM)
Sector: Communication Services | Telecom Services
Reason: Formation of a Falling Wedge Pattern
A falling wedge pattern is formed by joining two downward-sloping, converging trendlines having a contracting range. The pattern appears to be wide at the top and continues to contract as prices fall. A breakout from a falling wedge pattern can indicate either reversal or continuation depending on where the pattern appeared in the trend.
A stock that has broken out of a falling wedge pattern would have gained momentum and would have the potential to move higher.
Buy Level(s): The ideal buy level for ZM is if the stock breaks out of the falling wedge pattern and closes above the nearest resistance level of $274.00. This is marked in the chart below as a green color dotted line.
Daily chart – ZM
ZM – Falling Wedge Pattern
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day