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 | Ally Financial Inc. | NYSE: ALLY | $26.07 | $27.10 | Falling Wedge Pattern Breakout |
| 2 | Delta Air Lines, Inc. | NYSE: DAL | $36.03 | $36.30 | Ascending Triangle Pattern |
| 3 | LyondellBasell Industries N.V. | NYSE: LYB | $90.10 | $91.50 | Symmetrical Triangle Pattern Breakout |
| 4 | Aurinia Pharmaceuticals Inc. | NASDAQ: AUPH | $7.55 | $8.25 | Falling Wedge Pattern Breakout |
| 5 | World Wrestling Entertainment, Inc. | NYSE: WWE | $84.27 | $85.30 | Uptrend Channel Breakout |
| 6 | The Mosaic Company | NYSE: MOS | $46.73 | $47.50 | Falling Wedge Pattern |
| 7 | ArcelorMittal S.A. | NYSE: MT | $28.74 | $29.20 | Symmetrical Triangle Pattern Breakout |
| 8 | Revance Therapeutics, Inc. | NASDAQ: RVNC | $19.71 | $20.30 | Falling Wedge Pattern |
| 9 | Block, Inc. | NYSE: SQ | $68.99 | $71.20 | Symmetrical Triangle Pattern |
| 10 | Western Digital Corporation | NASDAQ: WDC | $37.17 | $37.70 | 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 Ally Financial Inc. (NYSE: ALLY)
Sector: Financial | Credit Services
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 ALLY is above the nearest resistance level of $27.10. This is marked in the chart below as a green color dotted line.
Daily chart – ALLY
ALLY – Falling Wedge Pattern Breakout
#2 Delta Air Lines, Inc. (NYSE: DAL)
Sector: Industrials | Airlines
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 DAL is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $36.30. This is marked in the chart below as a green color dotted line.
Daily chart – DAL
DAL – Ascending Triangle Pattern
#3 LyondellBasell Industries N.V. (NYSE: LYB)
Sector: Basic Materials | Specialty Chemicals
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 LYB is if the stock closes above the immediate resistance level of $91.50. This is marked in the chart below as a green color dotted line.
Daily chart – LYB
LYB – Symmetrical Triangle Pattern Breakout
#4 Aurinia Pharmaceuticals Inc. (NASDAQ: AUPH)
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 AUPH is above the nearest resistance level of $8.25. This is marked in the chart below as a green color dotted line.
Daily chart – AUPH
AUPH – Falling Wedge Pattern Breakout
#5 World Wrestling Entertainment, Inc. (NYSE: WWE)
Sector: Communication Services | Entertainment
Reason: Breakout From an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.
Buy Level(s): The stock has currently broken out of the uptrend channel. However, the ideal buy level for WWE is if the stock has a daily close above the near-term resistance level of $85.30. This is marked in the chart below as a green color dotted line.
Daily chart – WWE
WWE – Uptrend Channel Breakout
#6 The Mosaic Company (NYSE: MOS)
Sector: Basic Materials | Agricultural Inputs
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 MOS is if the stock breaks out of the falling wedge pattern, at a price of around $47.50. This is marked in the chart below as a green color dotted line.
Daily chart – MOS
MOS – Falling Wedge Pattern
#7 ArcelorMittal S.A. (NYSE: MT)
Sector: Basic Materials | Steel
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 MT is if the stock closes above the immediate resistance level of $29.20. This is marked in the chart below as a green color dotted line.
Daily chart – MT
MT – Symmetrical Triangle Pattern Breakout
#8 Revance Therapeutics, Inc. (NASDAQ: RVNC)
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 RVNC is if the stock breaks out of the falling wedge pattern, at a price of around $20.30. This is marked in the chart below as a green color dotted line.
Daily chart – RVNC
RVNC – Falling Wedge Pattern
#9 Block, Inc. (NYSE: SQ)
Sector: Technology | Software – Infrastructure
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 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 SQ is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $71.20. This is marked in the chart below as a green color dotted line.
Daily chart – SQ
SQ – Symmetrical Triangle Pattern
#10 Western Digital Corporation (NASDAQ: WDC)
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 WDC is above the nearest resistance level of $37.70. This is marked in the chart below as a green color dotted line.
Daily chart – WDC
WDC – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
Where to Invest $99 [sponsor]Motley Fool Stock Advisor's average stock pick is up over 350%*, beating the market by an incredible 4-1 margin. Here’s what you get if you join up with us today: Two new stock recommendations each month. A short list of Best Buys Now. Stocks we feel present the most timely buying opportunity, so you know what to focus on today. There's so much more, including a membership-fee-back guarantee. New members can join today for only $99/year.
Source: The Motley Fool