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 | Caribou Biosciences, Inc. | NASDAQ: CRBU | $7.26 | $7.50 | Falling Wedge Pattern Breakout |
| 2 | Seadrill Limited | NYSE: SDRL | $41.70 | $42.00 | Symmetrical Triangle Pattern Breakout |
| 3 | Huntsman Corporation | NYSE: HUN | $27.74 | $28.00 | Downtrend Channel Breakout |
| 4 | COMPASS Pathways plc | NASDAQ: CMPS | $9.88 | $11.00 | Consolidation Area |
| 5 | Sweetgreen, Inc. | NYSE: SG | $15.35 | $15.70 | Symmetrical Triangle Pattern Breakout |
| 6 | Revolve Group, Inc. | NYSE: RVLV | $16.53 | $16.90 | Falling Wedge Pattern |
| 7 | Warner Music Group Corp. | NASDAQ: WMG | $28.01 | $29.00 | Downtrend Channel Breakout |
| 8 | TAL Education Group | NYSE: TAL | $6.18 | $6.60 | Symmetrical Triangle Pattern |
| 9 | Schlumberger Limited | NYSE: SLB | $53.35 | $54.00 | Downtrend Channel Breakout |
| 10 | Tidewater Inc. | NYSE: TDW | $58.61 | $59.70 | Symmetrical 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 Caribou Biosciences, Inc. (NASDAQ: CRBU)
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 CRBU is above the nearest resistance level of $7.50. This is marked in the chart below as a green color dotted line.
Daily chart – CRBU
CRBU – Falling Wedge Pattern Breakout
#2 Seadrill Limited (NYSE: SDRL)
Sector: Energy | Oil & Gas Drilling
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 SDRL 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 – SDRL
SDRL – Symmetrical Triangle Pattern Breakout
#3 Huntsman Corporation (NYSE: HUN)
Sector: Basic Materials | Chemicals
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 HUN is if the stock has a daily close above $28.00. This is marked in the chart below as a green color dotted line.
Daily chart – HUN
HUN – Downtrend Channel Breakout
#4 COMPASS Pathways plc (NASDAQ: CMPS)
Sector: Healthcare | Medical Care Facilities
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 CMPS is above the breakout level of the consolidation area, at around $11.00. This is marked in the chart below as a green color dotted line.
Daily chart – CMPS
CMPS – Consolidation Area
#5 Sweetgreen, Inc. (NYSE: SG)
Sector: Consumer Cyclical | Restaurants
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 SG is if the stock closes above the immediate resistance level of $15.70. This is marked in the chart below as a green color dotted line.
Daily chart – SG
SG – Symmetrical Triangle Pattern Breakout
#6 Revolve Group, Inc. (NYSE: RVLV)
Sector: Consumer Cyclical | Internet Retail
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 RVLV is if the stock breaks out of the falling wedge pattern, at a price of around $16.90. This is marked in the chart below as a green color dotted line.
Daily chart – RVLV
RVLV – Falling Wedge Pattern
#7 Warner Music Group Corp. (NASDAQ: WMG)
Sector: Communication Services | Entertainment
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 WMG is if the stock has a daily close above $29.00. This is marked in the chart below as a green color dotted line.
Daily chart – WMG
WMG – Downtrend Channel Breakout
#8 TAL Education Group (NYSE: TAL)
Sector: Consumer Defensive | Education & Training Services
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 TAL is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $6.60. This is marked in the chart below as a green color dotted line.
Daily chart – TAL
TAL – Symmetrical Triangle Pattern
#9 Schlumberger Limited (NYSE: SLB)
Sector: Energy | Oil & Gas Equipment & 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.
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 SLB 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 – SLB
SLB – Downtrend Channel Breakout
#10 Tidewater Inc. (NYSE: TDW)
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 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 TDW is if the stock closes above the immediate resistance level of $59.70. This is marked in the chart below as a green color dotted line.
Daily chart – TDW
TDW – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
Source: Trades of the Day