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 | Snowflake Inc. | NYSE: SNOW | $197.71 | $210.00 | Falling Wedge Pattern Breakout |
| 2 | 3M Company | NYSE: MMM | $129.14 | $135.00 | Downtrend Channel |
| 3 | Destination XL Group, Inc. | NASDAQ: DXLG | $5.58 | $5.70 | Falling Wedge Pattern Breakout |
| 4 | Lancaster Colony Corporation | NASDAQ: LANC | $172.95 | $175.00 | Ascending Triangle Pattern |
| 5 | Daqo New Energy Corp. | NYSE: DQ | $71.87 | $72.50 | Symmetrical Triangle Pattern Breakout |
| 6 | Everbridge, Inc. | NASDAQ: EVBG | $41.99 | $42.70 | Falling Wedge Pattern Breakout |
| 7 | Minerva Neurosciences, Inc. | NASDAQ: NERV | $10.33 | $10.40 | Breakout From Consolidation Area |
| 8 | Juniper Networks, Inc. | NYSE: JNPR | $29.39 | $30.60 | Downtrend Channel Breakout |
| 9 | TAL Education Group | NYSE: TAL | $5.99 | $6.10 | Cup and Handle Pattern Breakout |
| 10 | DexCom, Inc. | NASDAQ: DXCM | $84.49 | $90.10 | Downtrend Channel |
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 Snowflake Inc. (NYSE: SNOW)
Sector: Technology | Software – Application
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 SNOW is above the nearest resistance level of $210.00. This is marked in the chart below as a green color dotted line.
Daily chart – SNOW
SNOW – Falling Wedge Pattern Breakout
#2 3M Company (NYSE: MMM)
Sector: Industrials | Specialty Industrial Machinery
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 MMM is if the stock breaks out of the downtrend channel and has a daily close above $135.00. This is marked in the chart below as a green color dotted line.
Daily chart – MMM
MMM – Downtrend Channel
#3 Destination XL Group, Inc. (NASDAQ: DXLG)
Sector: Consumer Cyclical | Apparel Retail
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 DXLG is above the nearest resistance level of $5.70. This is marked in the chart below as a green color dotted line.
Daily chart – DXLG
DXLG – Falling Wedge Pattern Breakout
#4 Lancaster Colony Corporation (NASDAQ: LANC)
Sector: Consumer Defensive | Packaged Foods
Reason: Formation of an Ascending Triangle Pattern
An ascending triangle pattern is a bullish pattern formed by drawing a horizontal line along the swing highs, and a rising trendline along the swing lows. These two lines result in the formation of a triangle. A breakout from this pattern is typically a strong bullish indication.
Buy Level(s): The ideal buy level for LANC is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $175.00. This is marked in the chart below as a green color dotted line.
Daily chart – LANC
LANC – Ascending Triangle Pattern
#5 Daqo New Energy Corp. (NYSE: DQ)
Sector: Technology | Semiconductor Equipment & Materials
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 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 DQ is if the stock closes above the immediate resistance level of $72.50. This is marked in the chart below as a green color dotted line.
Daily chart – DQ
DQ – Symmetrical Triangle Pattern Breakout
#6 Everbridge, Inc. (NASDAQ: EVBG)
Sector: Technology | Software – Application
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 EVBG is above the nearest resistance level of $42.70. This is marked in the chart below as a green color dotted line.
Daily chart – EVBG
EVBG – Falling Wedge Pattern Breakout
#7 Minerva Neurosciences, Inc. (NASDAQ: NERV)
Sector: Healthcare | Biotechnology
Reason: Breakout From a Consolidation Area
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 NERV is above the near-term resistance area, which translates to a price of around $10.40. This is marked in the chart below as a green color dotted line.
Daily chart – NERV
NERV – Breakout From Consolidation Area
#8 Juniper Networks, Inc. (NYSE: JNPR)
Sector: Technology | Communication Equipment
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 JNPR is if the stock has a daily close above $30.60. This is marked in the chart below as a green color dotted line.
Daily chart – JNPR
JNPR – Downtrend Channel Breakout
#9 TAL Education Group (NYSE: TAL)
Sector: Consumer Defensive | Education & Training Services
Reason: Breakout From a Cup and Handle Pattern
A Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. A Cup and Handle pattern is formed when the price initially declines, then levels off, and begins to rise again, forming a rounded cup-like structure.
The handle is then formed near the rim or lip of the cup, either sideways or declining price channel. A breakout from a cup and handle pattern 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 cup and handle pattern. However, the ideal buy level for TAL is above the price of around $6.10. This is marked in the chart below as a green color dotted line.
Daily chart – TAL
TAL – Cup and Handle Pattern Breakout
#10 DexCom, Inc. (NASDAQ: DXCM)
Sector: Healthcare | Diagnostics & Research
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 DXCM is if the stock breaks out of the downtrend channel and has a daily close above $90.10. This is marked in the chart below as a green color dotted line.
Daily chart – DXCM
DXCM – Downtrend Channel
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day