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 | Installed Building Products Inc. | NYSE: IBP | $173.25 | $178.20 | Falling Wedge Pattern |
| 2 | Supernus Pharmaceuticals Inc. | NASDAQ: SUPN | $32.74 | $33.30 | Symmetrical Triangle Pattern |
| 3 | UWM Holdings Corporation | NYSE: UWMC | $5.53 | $6.00 | Falling Wedge Pattern |
| 4 | Gamestop Corporation | NYSE: GME | $23.49 | $25.50 | Downtrend Channel |
| 5 | Sunrun Inc. | NASDAQ: RUN | $6.99 | $7.30 | Falling Wedge Pattern Breakout |
| 6 | Rocket Companies Inc. | NYSE: RKT | $15.40 | $15.90 | Symmetrical Triangle Pattern Breakout |
| 7 | PureCycle Technologies Inc. | NASDAQ: PCT | $5.99 | $7.80 | Downtrend Channel |
| 8 | American Rebel Holdings Inc. | NASDAQ: AREB | $19.50 | $21.70 | Falling Wedge Pattern Breakout |
| 9 | PennyMac Financial Services Inc. | NYSE: PFSI | $103.69 | $106.00 | Flag Pattern |
| 10 | Signet Jewelers Ltd | NYSE: SIG | $54.89 | $57.00 | 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 Installed Building Products Inc. (NYSE: IBP)
Sector: Consumer Cyclical • Residential Construction
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 IBP is if the stock breaks out of the falling wedge pattern, at a price of around $178.20. This is marked in the chart below as a green color dotted line.
Daily chart – IBP
IBP – Falling Wedge Pattern
#2 Supernus Pharmaceuticals Inc. (NASDAQ: SUPN)
Sector: Healthcare • Drug Manufacturers – Specialty & Generic
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 SUPN is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $33.30. This is marked in the chart below as a green color dotted line.
Daily chart – SUPN
SUPN – Symmetrical Triangle Pattern
#3 UWM Holdings Corporation (NYSE: UWMC)
Sector: Financial • Mortgage Finance
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 UWMC is if the stock breaks out of the falling wedge pattern, at a price of around $6.00. This is marked in the chart below as a green color dotted line.
Daily chart – UWMC
UWMC – Falling Wedge Pattern
#4 Gamestop Corporation (NYSE: GME)
Sector: Consumer Cyclical • Specialty 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 GME is if the stock breaks out of the downtrend channel and has a daily close above $25.50. This is marked in the chart below as a green color dotted line.
Daily chart – GME
GME – Downtrend Channel
#5 Sunrun Inc. (NASDAQ: RUN)
Sector: Technology • Solar
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 RUN is above the nearest resistance level of $7.30. This is marked in the chart below as a green color dotted line.
Daily chart – RUN
RUN – Falling Wedge Pattern Breakout
#6 Rocket Companies Inc. (NYSE: RKT)
Sector: Financial • Mortgage Finance
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 RKT is if the stock closes above the immediate resistance level of $15.90. This is marked in the chart below as a green color dotted line.
Daily chart – RKT
RKT – Symmetrical Triangle Pattern Breakout
#7 PureCycle Technologies Inc. (NASDAQ: PCT)
Sector: Industrials • Pollution & Treatment Controls
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 PCT is if the stock breaks out of the downtrend channel and has a daily close above $7.80. This is marked in the chart below as a green color dotted line.
Daily chart – PCT
PCT – Downtrend Channel
#8 American Rebel Holdings Inc. (NASDAQ: AREB)
Sector: Consumer Cyclical • Footwear & Accessories
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 AREB is above the nearest resistance level of $21.70. This is marked in the chart below as a green color dotted line.
Daily chart – AREB
AREB – Falling Wedge Pattern Breakout
#9 PennyMac Financial Services Inc. (NYSE: PFSI)
Sector: Financial • Mortgage Finance
Reason: Formation of 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): The ideal buy level for PFSI is if the stock breaks out of the flag pattern, at around $106.00. This is marked in the chart below as a green color dotted line.
Daily chart – PFSI
PFSI – Flag Pattern
#10 Signet Jewelers Ltd (NYSE: SIG)
Sector: Consumer Cyclical • Luxury Goods
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 SIG is if the stock breaks out of the falling wedge pattern, at a price of around $57.00. This is marked in the chart below as a green color dotted line.
Daily chart – SIG
SIG – Falling Wedge Pattern
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day