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 | United Micro Electronics ADR | NYSE: UMC | $7.66 | $7.85 | Symmetrical Triangle Pattern |
| 2 | Lam Research Corp. | NASDAQ: LRCX | $688.43 | $688.50 | Flag Pattern Breakout |
| 3 | AMBAC Financial Group Inc. | NYSE: AMBC | $14.64 | $14.90 | Downtrend Channel Breakout |
| 4 | Copart, Inc. | NASDAQ: CPRT | $48.73 | $48.90 | Breakout From Consolidation Area |
| 5 | Viper Energy Partners LP | NASDAQ: VNOM | $30.15 | $30.50 | Symmetrical Triangle Pattern Breakout |
| 6 | Applovin Corp | NASDAQ: APP | $43.79 | $45.00 | Flag Pattern Breakout |
| 7 | Aramark | NYSE: ARMK | $28.52 | $29.00 | Downtrend Channel Breakout |
| 8 | Applied Materials Inc. | NASDAQ: AMAT | $150.68 | $152.50 | Symmetrical Triangle Pattern Breakout |
| 9 | Pagerduty Inc. | NYSE: PD | $21.69 | $22.70 | Falling Wedge Pattern Breakout |
| 10 | Unity Software Inc | NYSE: U | $27.01 | $29.00 | 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 United Micro Electronics ADR (NYSE: UMC)
Sector: Technology • Semiconductors
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 UMC is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $7.85. This is marked in the chart below as a green color dotted line.
Daily chart – UMC
UMC – Symmetrical Triangle Pattern
#2 Lam Research Corp. (NASDAQ: LRCX)
Sector: Technology • Semiconductor Equipment & Materials
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 LRCX is above the near-term resistance level of $688.50. This is marked in the chart below as a green color dotted line.
Daily chart – LRCX
LRCX – Flag Pattern Breakout
#3 AMBAC Financial Group Inc. (NYSE: AMBC)
Sector: Financial • Insurance – Specialty
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 AMBC is if the stock has a daily close above $14.90. This is marked in the chart below as a green color dotted line.
Daily chart – AMBC
AMBC – Downtrend Channel Breakout
#4 Copart, Inc. (NASDAQ: CPRT)
Sector: Industrials • Specialty Business 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): Although the stock has currently broken out of a consolidation area, the ideal buy level for CPRT is above the near-term resistance area, which translates to a price of around $48.90. This is marked in the chart below as a green color dotted line.
Daily chart – CPRT
CPRT – Breakout From Consolidation Area
#5 Viper Energy Partners LP (NASDAQ: VNOM)
Sector: Energy • Oil & Gas Midstream
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 VNOM is if the stock closes above the immediate resistance level of $30.50. This is marked in the chart below as a green color dotted line.
Daily chart – VNOM
VNOM – Symmetrical Triangle Pattern Breakout
#6 Applovin Corp (NASDAQ: APP)
Sector: Technology • Software – Application
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 APP is above the near-term resistance level of $45.00. This is marked in the chart below as a green color dotted line.
Daily chart – APP
APP – Flag Pattern Breakout
#7 Aramark (NYSE: ARMK)
Sector: Industrials • Specialty Business Services
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 ARMK 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 – ARMK
ARMK – Downtrend Channel Breakout
#8 Applied Materials Inc. (NASDAQ: AMAT)
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 AMAT is if the stock closes above the immediate resistance level of $152.50. This is marked in the chart below as a green color dotted line.
Daily chart – AMAT
AMAT – Symmetrical Triangle Pattern Breakout
#9 Pagerduty Inc. (NYSE: PD)
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 PD is above the nearest resistance level of $22.70. This is marked in the chart below as a green color dotted line.
Daily chart – PD
PD – Falling Wedge Pattern Breakout
#10 Unity Software Inc. (NYSE: U)
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 U is if the stock breaks out of the downtrend channel and has a daily close above $29.00. This is marked in the chart below as a green color dotted line.
Daily chart – U
U – Downtrend Channel
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day