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 | Merck & Co Inc. | NYSE: MRK | $100.30 | $101.00 | Flag Pattern Breakout |
| 2 | RH | NYSE: RH | $162.01 | $171.40 | Falling Wedge Pattern Breakout |
| 3 | Visa Inc. | NYSE: V | $347.83 | $350.50 | Symmetrical Triangle Pattern Breakout |
| 4 | Weyerhaeuser Co. | NYSE: WY | $23.39 | $23.70 | Downtrend Channel Breakout |
| 5 | Tesla Inc. | NASDAQ: TSLA | $458.96 | $470.00 | Ascending Triangle Pattern |
| 6 | Tilray Brands Inc. | NASDAQ: TLRY | $12.15 | $13.00 | Falling Wedge Pattern Breakout |
| 7 | Clear Secure Inc. | NYSE: YOU | $41.08 | $42.00 | Symmetrical Triangle Pattern Breakout |
| 8 | Walt Disney Co. | NYSE: DIS | $111.60 | $115.30 | Downtrend Channel |
| 9 | Dynatrace Inc. | NYSE: DT | $46.04 | $47.00 | Falling Wedge Pattern |
| 10 | Lululemon Athletica Inc. | NASDAQ: LULU | $204.97 | $208.20 | 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 Merck & Co Inc. (NYSE: MRK)
Sector: Healthcare • Drug Manufacturers – General
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 MRK is above the near-term resistance level of $101.00. This is marked in the chart below as a green color dotted line.
Daily chart – MRK
MRK – Flag Pattern Breakout
#2 RH (NYSE: RH)
Sector: Consumer Cyclical • Specialty Retail
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 RH is above the nearest resistance level of $171.40. This is marked in the chart below as a green color dotted line.
Daily chart – RH
RH – Falling Wedge Pattern Breakout
#3 Visa Inc. (NYSE: V)
Sector: Financial • Credit 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 V is if the stock closes above the immediate resistance level of $350.50. This is marked in the chart below as a green color dotted line.
Daily chart – V
V – Symmetrical Triangle Pattern Breakout
#4 Weyerhaeuser Co. (NYSE: WY)
Sector: Real Estate • REIT – 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 WY is if the stock has a daily close above $23.70. This is marked in the chart below as a green color dotted line.
Daily chart – WY
WY – Downtrend Channel Breakout
#5 Tesla Inc. (NASDAQ: TSLA)
Sector: Consumer Cyclical • Auto Manufacturers
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 TSLA is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $470.00. This is marked in the chart below as a green color dotted line.
Daily chart – TSLA
TSLA – Ascending Triangle Pattern
#6 Tilray Brands Inc. (NASDAQ: TLRY)
Sector: Healthcare • Drug Manufacturers – Specialty & Generic
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 TLRY is above the nearest resistance level of $13.00. This is marked in the chart below as a green color dotted line.
Daily chart – TLRY
TLRY – Falling Wedge Pattern Breakout
#7 Clear Secure Inc. (NYSE: YOU)
Sector: Technology • Software – Application
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 YOU is if the stock closes above the immediate resistance level of $42.00. This is marked in the chart below as a green color dotted line.
Daily chart – YOU
YOU – Symmetrical Triangle Pattern Breakout
#8 Walt Disney Co. (NYSE: DIS)
Sector: Communication Services • Entertainment
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 DIS is if the stock breaks out of the downtrend channel and has a daily close above $115.30. This is marked in the chart below as a green color dotted line.
Daily chart – DIS
DIS – Downtrend Channel
#9 Dynatrace Inc. (NYSE: DT)
Sector: Technology • Software – Application
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 DT is if the stock breaks out of the falling wedge pattern, at a price of around $47.00. This is marked in the chart below as a green color dotted line.
Daily chart – DT
DT – Falling Wedge Pattern
#10 Lululemon Athletica Inc. (NASDAQ: LULU)
Sector: Consumer Cyclical • Apparel Retail
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 LULU is if the stock breaks out of the downtrend channel and has a daily close above $208.20. This is marked in the chart below as a green color dotted line.
Daily chart – LULU
LULU – Downtrend Channel
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day
