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 | Academy Sports and Outdoors, Inc. | NASDAQ: ASO | $46.90 | $50.00 | Uptrend Channel |
| 2 | British American Tobacco p.l.c. | NYSE: BTI | $36.72 | $37.40 | Falling Wedge Pattern Breakout |
| 3 | Red Rock Resorts, Inc. | NASDAQ: RRR | $51.94 | $52.80 | Flag Pattern Breakout |
| 4 | CVS Health Corporation | NYSE: CVS | $98.86 | $99.20 | Uptrend Channel Breakout |
| 5 | HUTCHMED (China) Limited | NASDAQ: HCM | $33.16 | $36.20 | Symmetrical Triangle Pattern |
| 6 | The Kraft Heinz Company | NASDAQ: KHC | $34.15 | $36.50 | Downtrend Channel |
| 7 | Microsoft Corporation | NASDAQ: MSFT | $342.54 | $343.80 | Flag Pattern Breakout |
| 8 | Juniper Networks, Inc. | NYSE: JNPR | $34.00 | $34.20 | Uptrend Channel Breakout |
| 9 | Cohn Robbins Holdings Corp. | NYSE: CRHC | $9.95 | $10.00 | Consolidation Area |
| 10 | McCormick & Company, Incorporated | NYSE: MKC | $90.51 | $91.50 | Downtrend Channel 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 Academy Sports and Outdoors, Inc. (NASDAQ: ASO)
Sector: Consumer Cyclical | Specialty Retail
Reason: Formation of an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for ASO is if the stock breaks out of the uptrend channel and has a daily close above $50.00. This is marked in the chart below as a green color dotted line.
Daily chart – ASO
ASO – Uptrend Channel
#2 British American Tobacco p.l.c. (NYSE: BTI)
Sector: Consumer Defensive | Tobacco
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 BTI is above the nearest resistance level of $37.40. This is marked in the chart below as a green color dotted line.
Daily chart – BTI
BTI – Falling Wedge Pattern Breakout
#3 Red Rock Resorts, Inc. (NASDAQ: RRR)
Sector: Consumer Cyclical | Resorts & Casinos
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 RRR is above the near-term resistance level of $52.80. This is marked in the chart below as a green color dotted line.
Daily chart – RRR
RRR – Flag Pattern Breakout
#4 CVS Health Corporation (NYSE: CVS)
Sector: Healthcare | Healthcare Plans
Reason: Breakout From an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.
Buy Level(s): Although the stock has currently broken out of the uptrend channel, the ideal buy level for CVS is if the stock has a daily close above the near-term resistance level of $99.20. This is marked in the chart below as a green color dotted line.
Daily chart – CVS
CVS – Uptrend Channel Breakout
#5 HUTCHMED (China) Limited (NASDAQ: HCM)
Sector: Healthcare | Drug Manufacturers – General
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 an 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 HCM is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $36.20. This is marked in the chart below as a green color dotted line.
Daily chart – HCM
HCM – Symmetrical Triangle Pattern
#6 The Kraft Heinz Company (NASDAQ: KHC)
Sector: Consumer Defensive | Packaged Foods
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 ideal buy level for KHC is if the stock has a daily close above the breakout level of the downtrend channel and closes above the immediate resistance area, at around $36.50. This is marked in the chart below as a green color dotted line.
Daily chart – KHC
KHC – Downtrend Channel
#7 Microsoft Corporation (NASDAQ: MSFT)
Sector: Technology | Software – Infrastructure
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 MSFT is above the near-term resistance level of $343.80. This is marked in the chart below as a green color dotted line.
Daily chart – MSFT
MSFT – Flag Pattern Breakout
#8 Juniper Networks, Inc. (NYSE: JNPR)
Sector: Technology | Communication Equipment
Reason: Breakout From an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.
Buy Level(s): Although the stock has currently broken out of the uptrend channel, the ideal buy level for JNPR is if the stock has a daily close above the near-term resistance level of $34.20. This is marked in the chart below as a green color dotted line.
Daily chart – JNPR
Uptrend Channel Breakout
#9 Cohn Robbins Holdings Corp. (NYSE: CRHC)
Sector: Financial | Shell Companies
Reason: Formation of 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): The ideal buy level for CHRC is above the breakout level of the consolidation area, at around $10.00. This is marked in the chart below as a green color dotted line.
Daily chart – CRHC
CRHC – Consolidation Area
#10 McCormick & Company, Incorporated (NYSE: MKC)
Sector: Consumer Defensive | Packaged Foods
Reason: Breakout From 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): Although the stock has broken out of the downtrend channel, the ideal buy level for MKC is if it has a daily close above the breakout level of the consolidation area, at around $91.50. This is marked in the chart below as a green color dotted line.
Daily chart – MKC
MKC – Downtrend Channel Breakout
Happy Trading!
Trades of The Day Research Team
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