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 | Block, Inc. | NYSE: SQ | $119.82 | $129.80 | Downtrend Channel Breakout |
| 2 | U.S. Silica Holdings, Inc. | NYSE: SLCA | $14.09 | $14.25 | Symmetrical Triangle Pattern Breakout |
| 3 | Etsy, Inc. | NASDAQ: ETSY | $148.94 | $158.00 | Falling Wedge Pattern Breakout |
| 4 | AerCap Holdings N.V. | NYSE: AER | $62.81 | $69.00 | Ascending Triangle Pattern |
| 5 | DraftKings Inc. | NASDAQ: DKNG | $22.20 | $24.30 | Falling Wedge Pattern |
| 6 | Farfetch Limited | NYSE: FTCH | $20.92 | $23.30 | Downtrend Channel |
| 7 | Playtika Holding Corp. | NASDAQ: PLTK | $21.28 | $22.60 | Symmetrical Triangle Pattern Breakout |
| 8 | 3M Company | NYSE: MMM | $150.51 | $151.70 | Falling Wedge Pattern |
| 9 | Maravai LifeSciences Holdings, Inc. | NASDAQ: MRVI | $37.11 | $39.40 | Downtrend Channel Breakout |
| 10 | Aerie Pharmaceuticals, Inc. | NASDAQ: AERI | $7.64 | $8.70 | Falling Wedge 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 Block, Inc. (NYSE: SQ)
Sector: Technology | Software – Infrastructure
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 SQ is if the stock has a daily close above $129.80. This is marked in the chart below as a green color dotted line.
Daily chart – SQ
SQ- Downtrend Channel Breakout
#2 U.S. Silica Holdings, Inc. (NYSE: SLCA)
Sector: Energy | Oil & Gas Equipment & 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 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 stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for SLCA is if the stock closes above the immediate resistance level of $14.25. This is marked in the chart below as a green color dotted line.
Daily chart – SLCA
SLCA – Symmetrical Triangle Pattern Breakout
#3 Etsy, Inc. (NASDAQ: ETSY)
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 ETSY is above the nearest resistance level of $158.00. This is marked in the chart below as a green color dotted line.
Daily chart – ETSY
ETSY – Falling Wedge Pattern Breakout
#4 AerCap Holdings N.V. (NYSE: AER)
Sector: Industrials | Airports & Air Services
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 AER is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $69.00. This is marked in the chart below as a green color dotted line.
Daily chart – AER
AER – Ascending Triangle Pattern
#5 DraftKings Inc. (NASDAQ: DKNG)
Sector: Consumer Cyclical | Gambling
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 DKNG is if the stock breaks out of the falling wedge pattern, at a price of around $24.30. This is marked in the chart below as a green color dotted line.
Daily chart – DKNG
DKNG – Falling Wedge Pattern
#6 Farfetch Limited (NYSE: FTCH)
Sector: Consumer Cyclical | Internet 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 FTCH is if the stock breaks out of the downtrend channel and has a daily close above $23.30. This is marked in the chart below as a green color dotted line.
Daily chart – FTCH
FTCH – Downtrend Channel
#7 Playtika Holding Corp. (NASDAQ: PLTK)
Sector: Communication Services | Electronic Gaming & Multimedia
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 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 stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for PLTK is if the stock closes above the immediate resistance level of $22.60. This is marked in the chart below as a green color dotted line.
Daily chart – PLTK
PLTK – Symmetrical Triangle Pattern Breakout
#8 3M Company (NYSE: MMM)
Sector: Industrials | Specialty Industrial Machinery
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 MMM is if the stock breaks out of the falling wedge pattern, at a price of around $151.70. This is marked in the chart below as a green color dotted line.
Daily chart – MMM
MMM – Falling Wedge Pattern
#9 Maravai LifeSciences Holdings, Inc. (NASDAQ: MRVI)
Sector: Healthcare | Biotechnology
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 MRVI is if the stock has a daily close above $39.40. This is marked in the chart below as a green color dotted line.
Daily chart – MRVI
MRVI – Downtrend Channel Breakout
#10 Aerie Pharmaceuticals, Inc. (NASDAQ: AERI)
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 AERI is above the nearest resistance level of $8.70. This is marked in the chart below as a green color dotted line.
Daily chart – AERI
AERI – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day