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 | Lululemon Athletica Inc. | NASDAQ: LULU | $321.17 | $323.00 | Downtrend Channel Breakout |
| 2 | Madrigal Pharmaceuticals Inc. | NASDAQ: MDGL | $319.58 | $321.00 | Symmetrical Triangle Pattern Breakout |
| 3 | Cardinal Health, Inc. | NYSE: CAH | $116.13 | $117.10 | Ascending Triangle Pattern Breakout |
| 4 | Intel Corp | NASDAQ: INTC | $23.20 | $24.00 | Symmetrical Triangle Pattern Breakout |
| 5 | Proto Labs Inc. | NYSE: PRLB | $38.00 | $38.70 | Downtrend Channel Breakout |
| 6 | Werner Enterprises, Inc. | NASDAQ: WERN | $37.54 | $39.50 | Symmetrical Triangle Pattern |
| 7 | Boeing Co. | NYSE: BA | $154.59 | $157.00 | Falling Wedge Pattern |
| 8 | Chart Industries Inc. | NYSE: GTLS | $130.00 | $132.30 | Symmetrical Triangle Pattern Breakout |
| 9 | Vir Biotechnology Inc. | NASDAQ: VIR | $9.26 | $9.50 | Falling Wedge Pattern Breakout |
| 10 | Waters Corp | NYSE: WAT | $387.21 | $388.50 | 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 Lululemon Athletica Inc. (NASDAQ: LULU)
Sector: Consumer Cyclical • Apparel Retail
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 LULU is if the stock has a daily close above $323.00. This is marked in the chart below as a green color dotted line.
Daily chart – LULU
LULU – Downtrend Channel Breakout
#2 Madrigal Pharmaceuticals Inc. (NASDAQ: MDGL)
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 MDGL is if the stock closes above the immediate resistance level of $321.00. This is marked in the chart below as a green color dotted line.
Daily chart – MDGL
MDGL – Symmetrical Triangle Pattern Breakout
#3 Cardinal Health, Inc. (NYSE: CAH)
Sector: Healthcare • Medical Distribution
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 CAH is if the stock has a daily close above the near-term resistance level of $117.10. This is marked in the chart below as a green color dotted line.
Daily chart – CAH
CAH – Ascending Triangle Pattern Breakout
#4 Intel Corp (NASDAQ: INTC)
Sector: Technology • Semiconductors
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 INTC is if the stock closes above the immediate resistance level of $24.00. This is marked in the chart below as a green color dotted line.
Daily chart – INTC
INTC – Symmetrical Triangle Pattern Breakout
#5 Proto Labs Inc. (NYSE: PRLB)
Sector: Industrials • Metal Fabrication
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 PRLB is if the stock has a daily close above $38.70. This is marked in the chart below as a green color dotted line.
Daily chart – PRLB
PRLB – Downtrend Channel Breakout
#6 Werner Enterprises, Inc. (NASDAQ: WERN)
Sector: Industrials • Trucking
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 WERN is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $39.50. This is marked in the chart below as a green color dotted line.
Daily chart – WERN
WERN – Symmetrical Triangle Pattern
#7 Boeing Co. (NYSE: BA)
Sector: Industrials • Aerospace & Defense
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 BA is if the stock breaks out of the falling wedge pattern, at a price of around $157.00. This is marked in the chart below as a green color dotted line.
Daily chart – BA
BA – Falling Wedge Pattern
#8 Chart Industries Inc. (NYSE: GTLS)
Sector: Industrials • Specialty Industrial Machinery
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 GTLS is if the stock closes above the immediate resistance level of $132.30. This is marked in the chart below as a green color dotted line.
Daily chart – GTLS
GTLS – Symmetrical Triangle Pattern Breakout
#9 Vir Biotechnology Inc. (NASDAQ: VIR)
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 VIR is above the nearest resistance level of $9.50. This is marked in the chart below as a green color dotted line.
Daily chart – VIR
VIR – Falling Wedge Pattern Breakout
#10 Waters Corp (NYSE: WAT)
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 WAT is if the stock has a daily close above the near-term resistance level of $388.50. This is marked in the chart below as a green color dotted line.
Daily chart – WAT
WAT – Ascending Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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