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 | Lemonade Inc. | NYSE: LMND | $17.32 | $17.50 | Falling Wedge Pattern Breakout |
| 2 | Revance Therapeutics Inc. | NASDAQ: RVNC | $9.23 | $10.40 | Downtrend Channel |
| 3 | Paramount Global | NASDAQ: PARA | $13.76 | $14.10 | Falling Wedge Pattern Breakout |
| 4 | Apple Inc. | NASDAQ: AAPL | $176.65 | $181.20 | Flag Pattern |
| 5 | Udemy Inc. | NASDAQ: UDMY | $12.45 | $12.70 | Symmetrical Triangle Pattern Breakout |
| 6 | Expedia Group Inc. | NASDAQ: EXPE | $112.71 | $113.00 | Falling Wedge Pattern Breakout |
| 7 | Cloudflare Inc. | NYSE: NET | $64.42 | $65.60 | Downtrend Channel |
| 8 | Alpine Immune Sciences Inc. | NASDAQ: ALPN | $16.07 | $16.40 | Symmetrical Triangle Pattern Breakout |
| 9 | Zurn Elkay Water Solutions Corp | NYSE: ZWS | $28.65 | $29.00 | Downtrend Channel Breakout |
| 10 | Five9 Inc. | NASDAQ: FIVN | $63.30 | $65.00 | 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 Lemonade Inc. (NYSE: LMND)
Sector: Financial • Insurance – Property & Casualty
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 LMND is above the nearest resistance level of $17.50. This is marked in the chart below as a green color dotted line.
Daily chart – LMND
LMND – Falling Wedge Pattern Breakout
#2 Revance Therapeutics Inc. (NASDAQ: RVNC)
Sector: Healthcare • Biotechnology
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 RVNC is if the stock breaks out of the downtrend channel and has a daily close above $10.40. This is marked in the chart below as a green color dotted line.
Daily chart – RVNC
RVNC – Downtrend Channel
#3 Paramount Global (NASDAQ: PARA)
Sector: Communication Services • Entertainment
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 PARA is above the nearest resistance level of $14.10. This is marked in the chart below as a green color dotted line.
Daily chart – PARA
PARA – Falling Wedge Pattern Breakout
#4 Apple Inc. (NASDAQ: AAPL)
Sector: Technology • Consumer Electronics
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 AAPL is if the stock breaks out of the flag pattern, at around $181.20. This is marked in the chart below as a green color dotted line.
Daily chart – AAPL
AAPL – Flag Pattern
#5 Udemy Inc. (NASDAQ: UDMY)
Sector: Consumer Defensive • Education & Training Services
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 UDMY is if the stock closes above the immediate resistance level of $12.70. This is marked in the chart below as a green color dotted line.
Daily chart – UDMY
UDMY – Symmetrical Triangle Pattern Breakout
#6 Expedia Group Inc. (NASDAQ: EXPE)
Sector: Consumer Cyclical • Travel 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 EXPE is above the nearest resistance level of $113.00. This is marked in the chart below as a green color dotted line.
Daily chart – EXPE
EXPE – Falling Wedge Pattern Breakout
#7 Cloudflare Inc. (NYSE: NET)
Sector: Technology • Software – Infrastructure
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 NET is if the stock breaks out of the downtrend channel and has a daily close above $65.60. This is marked in the chart below as a green color dotted line.
Daily chart – NET
NET – Downtrend Channel
#8 Alpine Immune Sciences Inc. (NASDAQ: ALPN)
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 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 ALPN is if the stock closes above the immediate resistance level of $16.40. This is marked in the chart below as a green color dotted line.
Daily chart – ALPN
ALPN – Symmetrical Triangle Pattern Breakout
#9 Zurn Elkay Water Solutions Corp (NYSE: ZWS)
Sector: Industrials • Pollution & Treatment Controls
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 ZWS is if the stock has a daily close above $29.00. This is marked in the chart below as a green color dotted line.
Daily chart – ZWS
ZWS – Downtrend Channel Breakout
#10 Five9 Inc. (NASDAQ: FIVN)
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 FIVN is above the nearest resistance level of $65.00. This is marked in the chart below as a green color dotted line.
Daily chart – FIVN
FIVN – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day