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 | StoneCo Ltd. | NASDAQ: STNE | $17.41 | $25.50 | Downtrend Channel |
| 2 | Mercury Systems, Inc. | NASDAQ: MRCY | $55.92 | $57.90 | Falling Wedge Pattern Breakout |
| 3 | Infosys Limited | NYSE: INFY | $24.73 | $24.90 | Breakout From Consolidation Area |
| 4 | Bausch Health Companies Inc. | NYSE: BHC | $27.99 | $29.50 | Downtrend Channel |
| 5 | BridgeBio Pharma, Inc. | NASDAQ: BBIO | $40.62 | $53.80 | Falling Wedge Pattern |
| 6 | Hertz Global Holdings, Inc Common Stock | NASDAQ: HTZ | $24.00 | $27.20 | Symmetrical Triangle Pattern |
| 7 | Chimerix, Inc. | NASDAQ: CMRX | $7.18 | $7.20 | Downtrend Channel Breakout |
| 8 | CME Group Inc. | NASDAQ: CME | $228.96 | $229.70 | Pennant Pattern Breakout |
| 9 | Rite Aid Corporation | NYSE: RAD | $13.96 | $15.80 | Falling Wedge Pattern Breakout |
| 10 | Ortho Clinical Diagnostics Holdings plc | NASDAQ: OCDX | $21.16 | $21.40 | Symmetrical Triangle Pattern Breakout |
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 StoneCo Ltd. (NASDAQ: STNE)
Sector: Technology | Software – Application
Reason: Formation of a Downtrend Channel
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 ideal buy level for STNE is if the stock has a daily close above the breakout level of the downtrend channel and closes above the immediate resistance area, at around $25.50. This is marked in the chart below as a green color dotted line.
Daily chart – STNE
STNE – Downtrend Channel
#2 Mercury Systems, Inc. (NASDAQ: MRCY)
Sector: Industrials | Aerospace & Defense
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 MRCY is above the nearest resistance level of $57.90. This is marked in the chart below as a green color dotted line.
Daily chart – MRCY
MRCY – Falling Wedge Pattern Breakout
#3 Infosys Limited (NYSE: INFY)
Sector: Technology | Information Technology Services
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): Even though the stock has broken out of the consolidation area, the ideal buy level for INFY is above the near-term resistance are of around $24.90. This is marked in the chart below as a green color dotted line.
Daily chart – INFY
INFY – Breakout From Consolidation Area
#4 Bausch Health Companies Inc. (NYSE: BHC)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Formation of a Downtrend Channel
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 ideal buy level for BHC is if the stock has a daily close above the breakout level of the downtrend channel and closes above the immediate resistance area, at around $29.50. This is marked in the chart below as a green color dotted line.
Daily chart – BHC
BHC – Downtrend Channel
#5 BridgeBio Pharma, Inc. (NASDAQ: BBIO)
Sector: Healthcare | Biotechnology
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 BIBO is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $53.80. This is marked in the chart below as a green color dotted line.
Daily chart – BBIO
BBIO – Falling Wedge Pattern
#6 Hertz Global Holdings, Inc Common Stock (NASDAQ: HTZ)
Sector: Industrials | Rental & Leasing Services
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 HTZ is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $27.20. This is marked in the chart below as a green color dotted line.
Daily chart – HTZ
HTZ – Symmetrical Triangle Pattern
#7 Chimerix, Inc. (NASDAQ: CMRX)
Sector: Healthcare | Biotechnology
Reason: Breakout From a Downtrend Channel
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): Although the stock has broken out of the downtrend channel, the ideal buy level for CMRX is if it has a daily close above the breakout level of the consolidation area, at around $7.20. This is marked in the chart below as a green color dotted line.
Daily chart – CMRX
CMRX – Downtrend Channel Breakout
#8 CME Group Inc. (NASDAQ: CME)
Sector: Financial | Financial Data & Stock Exchanges
Reason: Breakout From a Pennant Pattern
A pennant 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 pennant pattern, the ideal buy level for CME is above the near-term resistance level of $229.70. This is marked in the chart below as a green color dotted line.
Daily chart – CME
CME – Pennant Pattern Breakout
#9 Rite Aid Corporation (NYSE: RAD)
Sector: Healthcare | Pharmaceutical Retailers
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 RAD is above the nearest resistance level of $15.80. This is marked in the chart below as a green color dotted line.
Daily chart – RAD
RAD – Falling Wedge Pattern Breakout
#10 Ortho Clinical Diagnostics Holdings plc (NASDAQ: OCDX)
Sector: Healthcare | Diagnostics & Research
Reason: Symmetrical Triangle Pattern Breakout
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 stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for OCDX is if the stock closes above the immediate resistance level of $21.40. This is marked in the chart below as a green color dotted line.
Daily chart – OCDX
OCDX – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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