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 | 8×8, Inc. | NYSE: EGHT | $11.72 | $12.00 | Downtrend Channel |
| 2 | Iovance Biotherapeutics, Inc. | NASDAQ: IOVA | $16.08 | $16.35 | Falling Wedge Pattern Breakout |
| 3 | Apellis Pharmaceuticals, Inc. | NASDAQ: APLS | $52.91 | $55.90 | Symmetrical Triangle Pattern Breakout |
| 4 | NIO Inc. | NYSE: NIO | $20.86 | $23.00 | Downtrend Channel |
| 5 | Rocket Lab USA, Inc. | NASDAQ: RKLB | $9.07 | $10.70 | Falling Wedge Pattern Breakout |
| 6 | HP Inc. | NYSE: HPQ | $37.09 | $38.20 | Flag Pattern Breakout |
| 7 | Alibaba Group Holding Limited | NYSE: BABA | $108.30 | $139.00 | Downtrend Channel |
| 8 | Asana, Inc. | NYSE: ASAN | $43.92 | $55.60 | Falling Wedge Pattern |
| 9 | Emerson Electric Co. | NYSE: EMR | $97.00 | $98.70 | Symmetrical Triangle Pattern |
| 10 | SentinelOne, Inc. | NYSE: S | $40.57 | $43.60 | Falling Wedge 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 8×8, Inc. (NYSE: EGHT)
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 daily chart shows that the stock is currently forming a downtrend channel. The ideal buy level for EGHT is if the stock breaks out of the downtrend channel and has a daily close above $12.00. This is marked in the chart below as a green color dotted line.
Daily chart – EGHT
EGHT – Downtrend Channel
#2 Iovance Biotherapeutics, Inc. (NASDAQ: IOVA)
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 IOVA is above the nearest resistance level of $16.35. This is marked in the chart below as a green color dotted line.
Daily chart – IOVA
IOVA – Falling Wedge Pattern Breakout
#3 Apellis Pharmaceuticals, Inc. (NASDAQ: APLS)
Sector: Healthcare | Biotechnology
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 APLS is if the stock closes above the immediate resistance level of $55.90. This is marked in the chart below as a green color dotted line.
Daily chart – APLS
APLS – Symmetrical Triangle Pattern Breakout
#4 NIO Inc. (NYSE: NIO)
Sector: Consumer Cyclical | Auto Manufacturers
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 daily chart shows that the stock is currently forming a downtrend channel. The ideal buy level for NIO is if the stock breaks out of the downtrend channel and has a daily close above $23.00. This is marked in the chart below as a green color dotted line.
Daily chart – NIO
NIO – Downtrend Channel
#5 Rocket Lab USA, Inc. (NASDAQ: RKLB)
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 RKLB is above the nearest resistance level of $10.70. This is marked in the chart below as a green color dotted line.
Daily chart – RKLB
RKLB – Falling Wedge Pattern Breakout
#6 HP Inc. (NYSE: HPQ)
Sector: Technology | Computer Hardware
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 HPQ is above the near-term resistance level of $38.20. This is marked in the chart below as a green color dotted line.
Daily chart – HPQ
HPQ – Flag Pattern Breakout
#7 Alibaba Group Holding Limited (NYSE: BABA)
Sector: Consumer Cyclical | Internet Retail
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 daily chart shows that the stock is currently forming a downtrend channel. The ideal buy level for BABA is if the stock breaks out of the downtrend channel and has a daily close above $139.00. This is marked in the chart below as a green color dotted line.
Daily chart – BABA
BABA – Downtrend Channel
#8 Asana, Inc. (NYSE: ASAN)
Sector: Technology | Software – Application
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 ASAN is if the stock breaks out of the falling wedge pattern, at a price of around $55.60. This is marked in the chart below as a green color dotted line.
Daily chart – ASAN
ASAN – Falling Wedge Pattern
#9 Emerson Electric Co. (NYSE: EMR)
Sector: Industrials | Specialty Industrial Machinery
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 EMR is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $98.70. This is marked in the chart below as a green color dotted line.
Daily chart – EMR
EMR – Symmetrical Triangle Pattern
#10 SentinelOne, Inc. (NYSE: S)
Sector: Technology | Software – Infrastructure
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 S is above the nearest resistance level of $43.60. This is marked in the chart below as a green color dotted line.
Daily chart – S
S – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day