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 | $94.65 | $97.00 | Downtrend Channel Breakout |
| 2 | McDonald’s Corp. | NYSE: MCD | $321.29 | $322.00 | Ascending Triangle Pattern Breakout |
| 3 | Campbells Co | NASDAQ: CPB | $41.81 | $42.10 | Falling Wedge Pattern Breakout |
| 4 | Verizon Communications Inc. | NYSE: VZ | $46.06 | $46.30 | Symmetrical Triangle Pattern Breakout |
| 5 | Biogen Inc. | NASDAQ: BIIB | $150.38 | $155.00 | Downtrend Channel Breakout |
| 6 | Colgate-Palmolive Co | NYSE: CL | $96.74 | $98.30 | Falling Wedge Pattern Breakout |
| 7 | Conagra Brands Inc. | NYSE: CAG | $27.23 | $27.70 | Downtrend Channel Breakout |
| 8 | Vodafone Group plc ADR | NASDAQ: VOD | $9.42 | $9.50 | Falling Wedge Pattern Breakout |
| 9 | Comcast Corp. | NASDAQ: CMCSA | $37.59 | $38.35 | Downtrend Channel Breakout |
| 10 | B&G Foods, Inc. | NYSE: BGS | $7.65 | $7.85 | 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 Merck & Co Inc. (NYSE: MRK)
Sector: Healthcare • Drug Manufacturers – General
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 MRK is if the stock has a daily close above $97.00. This is marked in the chart below as a green color dotted line.
Daily chart – MRK
MRK – Downtrend Channel Breakout
#2 McDonald’s Corp. (NYSE: MCD)
Sector: Consumer Cyclical • Restaurants
Reason: Breakout From 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): Although the stock has broken out of the ascending triangle pattern, the ideal buy level for MCD is if the stock has a daily close above the near-term resistance level of $322.00. This is marked in the chart below as a green color dotted line.
Daily chart – MCD
MCD – Ascending Triangle Pattern Breakout
#3 Campbells Co (NASDAQ: CPB)
Sector: Consumer Defensive • Packaged Foods
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 CPB is above the nearest resistance level of $42.10. This is marked in the chart below as a green color dotted line.
Daily chart – CPB
CPB – Falling Wedge Pattern Breakout
#4 Verizon Communications Inc. (NYSE: VZ)
Sector: Communication Services • Telecom 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 VZ is if the stock closes above the immediate resistance level of $46.30. This is marked in the chart below as a green color dotted line.
Daily chart – VZ
VZ – Symmetrical Triangle Pattern Breakout
#5 Biogen Inc. (NASDAQ: BIIB)
Sector: Healthcare • Drug Manufacturers – General
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 BIIB is if the stock has a daily close above $155.00. This is marked in the chart below as a green color dotted line.
Daily chart – BIIB
BIIB – Downtrend Channel Breakout
#6 Colgate-Palmolive Co (NYSE: CL)
Sector: Consumer Defensive • Household & Personal Products
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 CL is above the nearest resistance level of $98.30. This is marked in the chart below as a green color dotted line.
Daily chart – CL
CL – Falling Wedge Pattern Breakout
#7 Conagra Brands Inc. (NYSE: CAG)
Sector: Consumer Defensive • Packaged Foods
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 CAG is if the stock has a daily close above $27.70. This is marked in the chart below as a green color dotted line.
Daily chart – CAG
CAG – Downtrend Channel Breakout
#8 Vodafone Group plc ADR (NASDAQ: VOD)
Sector: Communication Services • Telecom Services
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 VOD is above the nearest resistance level of $9.50. This is marked in the chart below as a green color dotted line.
Daily chart – VOD
VOD – Falling Wedge Pattern Breakout
#9 Comcast Corp. (NASDAQ: CMCSA)
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.
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 CMCSA is if the stock has a daily close above $38.35. This is marked in the chart below as a green color dotted line.
Daily chart – CMCSA
CMCSA – Downtrend Channel Breakout
#10 B&G Foods, Inc. (NYSE: BGS)
Sector: Consumer Defensive • Packaged Foods
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 BGS is above the nearest resistance level of $7.85. This is marked in the chart below as a green color dotted line.
Daily chart – BGS
BGS – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day