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 | Verizon Communications Inc. | NYSE: VZ | $53.17 | $54.00 | Downtrend Channel Breakout |
| 2 | Eli Lilly and Company | NYSE: LLY | $267.42 | $273.50 | Ascending Triangle Pattern |
| 3 | FedEx Corporation | NYSE: FDX | $250.32 | $256.00 | Symmetrical Triangle Pattern Breakout |
| 4 | Futu Holdings Limited | NASDAQ: FUTU | $39.08 | $50.70 | Falling Wedge Pattern |
| 5 | Box, Inc. | NYSE: BOX | $26.22 | $27.00 | Ascending Triangle Pattern |
| 6 | The Coca-Cola Company | NYSE: KO | $57.73 | $59.00 | Breakout From Consolidation Area |
| 7 | Coupang, Inc. | NYSE: CPNG | $29.15 | $30.70 | Falling Wedge Pattern Breakout |
| 8 | Atlas Corp. | NYSE: ATCO | $13.75 | $14.70 | Symmetrical Triangle Pattern |
| 9 | Newmont Corporation | NYSE: NEM | $29.24 | $60.00 | Downtrend Channel Breakout |
| 10 | Teva Pharmaceutical Industries Limited | NYSE: TEVA | $8.20 | $10.20 | Falling Wedge Pattern |
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 Verizon Communications Inc. (NYSE: VZ)
Sector: Communication Services | Telecom 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.
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 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 VZ is if the stock has a daily close above $54.00. This is marked in the chart below as a green color dotted line.
Daily chart – VZ
VZ – Downtrend Channel Breakout
#2 Eli Lilly and Company (NYSE: LLY)
Sector: Healthcare | Drug Manufacturers – General
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 LLY is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $273.50. This is marked in the chart below as a green color dotted line.
Daily chart – LLY
LLY – Ascending Triangle Pattern
#3 FedEx Corporation (NYSE: FDX)
Sector: Industrials | Integrated Freight & Logistics
Reason: Breakout from 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 daily chart shows that the stock has currently broken out of a symmetrical triangle pattern. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for FDX is if the stock has a daily close above $256.00. This is marked in the chart below as a green color dotted line.
Daily chart – FDX
FDX – Symmetrical Triangle Pattern Breakout
#4 Futu Holdings Limited (NASDAQ: FUTU)
Sector: Financial | Capital Markets
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 FUTU is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $50.70. This is marked in the chart below as a green color dotted line.
Daily chart – FUTU
FUTU – Falling Wedge Pattern
#5 Box, Inc. (NYSE: BOX)
Sector: Technology | Software – Infrastructure
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 BOX is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $27.00. This is marked in the chart below as a green color dotted line.
Daily chart – BOX
BOX – Ascending Triangle Pattern
#6 The Coca-Cola Company (NYSE: KO)
Sector: Consumer Defensive | Beverages – Non-Alcoholic
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 KO is above the near-term resistance area, which translates to a price of around $59.00. This is marked in the chart below as a green color dotted line.
Daily chart – KO
KO – Breakout From Consolidation Area
#7 Coupang, Inc. (NYSE: CPNG)
Sector: Consumer Cyclical | Internet 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 CPNG is above the nearest resistance level of $30.70. This is marked in the chart below as a green color dotted line.
Daily chart – CPNG
CPNG – Falling Wedge Pattern Breakout
#8 Atlas Corp. (NYSE: ATCO)
Sector: Financial | Asset Management
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 ATCO is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $14.70. This is marked in the chart below as a green color dotted line.
Daily chart – ATCO
ATCO – Symmetrical Triangle Pattern
#9 Newmont Corporation (NYSE: NEM)
Sector: Basic Materials | Gold
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.
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 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 NEM is if the stock has a daily close above $60.00. This is marked in the chart below as a green color dotted line.
Daily chart – NEM
NEM – Downtrend Channel Breakout
#10 Teva Pharmaceutical Industries Limited (NYSE: TEVA)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
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 TEVA is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $10.20. This is marked in the chart below as a green color dotted line.
Daily chart – TEVA
TEVA – Falling Wedge Pattern
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day