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 | Goldman Sachs BDC, Inc. | NYSE: GSBD | $15.23 | $15.60 | Ascending Triangle Pattern |
| 2 | KB Home | NYSE: KBH | $68.24 | $68.40 | Flag Pattern Breakout |
| 3 | Xponential Fitness Inc. | NYSE: XPOF | $14.05 | $14.90 | Falling Wedge Pattern Breakout |
| 4 | Avista Corp. | NYSE: AVA | $33.30 | $35.20 | Symmetrical Triangle Pattern |
| 5 | Taiwan Semiconductor Manufacturing ADR | NYSE: TSM | $133.90 | $135.50 | Flag Pattern Breakout |
| 6 | Sterling Check Corp | NASDAQ: STER | $16.44 | $16.60 | Ascending Triangle Pattern Breakout |
| 7 | Arlo Technologies Inc. | NYSE: ARLO | $11.83 | $12.10 | Downtrend Channel Breakout |
| 8 | HP Inc. | NYSE: HPQ | $29.41 | $29.90 | Symmetrical Triangle Pattern |
| 9 | Civitas Resources Inc. | NYSE: CIVI | $70.81 | $71.90 | Falling Wedge Pattern Breakout |
| 10 | Radnet Inc. | NASDAQ: RDNT | $44.35 | $45.20 | Ascending Triangle 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 Goldman Sachs BDC, Inc. (NYSE: GSBD)
Sector: Financial • Asset Management
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 GSBD is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $15.60. This is marked in the chart below as a green color dotted line.
Daily chart – GSBD
GSBD – Ascending Triangle Pattern
#2 KB Home (NYSE: KBH)
Sector: Consumer Cyclical • Residential Construction
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 KBH is above the near-term resistance level of $68.40. This is marked in the chart below as a green color dotted line.
Daily chart – KBH
KBH – Flag Pattern Breakout
#3 Xponential Fitness Inc. (NYSE: XPOF)
Sector: Consumer Cyclical • Leisure
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 XPOF is above the nearest resistance level of $14.90. This is marked in the chart below as a green color dotted line.
Daily chart – XPOF
XPOF – Falling Wedge Pattern Breakout
#4 Avista Corp. (NYSE: AVA)
Sector: Utilities • Utilities – Diversified
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 AVA is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $35.20. This is marked in the chart below as a green color dotted line.
Daily chart – AVA
AVA – Symmetrical Triangle Pattern
#5 Taiwan Semiconductor Manufacturing ADR (NYSE: TSM)
Sector: Technology • Semiconductors
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 TSM is above the near-term resistance level of $135.50. This is marked in the chart below as a green color dotted line.
Daily chart – TSM
TSM – Flag Pattern Breakout
#6 Sterling Check Corp (NASDAQ: STER)
Sector: Technology • Software – Infrastructure
Reason: Breakout From 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): Although the stock has broken out of the ascending triangle pattern, the ideal buy level for STER is if the stock has a daily close above the near-term resistance level of $16.60. This is marked in the chart below as a green color dotted line.
Daily chart – STER
STER – Ascending Triangle Pattern Breakout
#7 Arlo Technologies Inc. (NYSE: ARLO)
Sector: Industrials • Building Products & 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 ARLO is if the stock has a daily close above $12.10. This is marked in the chart below as a green color dotted line.
Daily chart – ARLO
ARLO – Downtrend Channel Breakout
#8 HP Inc. (NYSE: HPQ)
Sector: Technology • Computer Hardware
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 HPQ is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $29.90. This is marked in the chart below as a green color dotted line.
Daily chart – HPQ
HPQ – Symmetrical Triangle Pattern
#9 Civitas Resources Inc. (NYSE: CIVI)
Sector: Energy • Oil & Gas E&P
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 CIVI is above the nearest resistance level of $71.90. This is marked in the chart below as a green color dotted line.
Daily chart – CIVI
CIVI – Falling Wedge Pattern Breakout
#10 Radnet Inc. (NASDAQ: RDNT)
Sector: Healthcare • Diagnostics & Research
Reason: Breakout From 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): Although the stock has broken out of the ascending triangle pattern, the ideal buy level for RDNT is if the stock has a daily close above the near-term resistance level of $45.20. This is marked in the chart below as a green color dotted line.
Daily chart – RDNT
RDNT – Ascending Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day