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 | Acacia Communications, Inc. | NASDAQ: ACIA | $69.47 | $69.70 | Breakout from a Consolidation Area |
| 2 | Ecopetrol S.A. | NYSE: EC | $11.87 | $12.00 | Double Bottom Pattern |
| 3 | Workday, Inc. | NASDAQ: WDAY | $209.40 | $233.00 | Symmetrical Triangle Pattern |
| 4 | Aprea Therapeutics, Inc. | NASDAQ: APRE | $24.84 | $25.60 | Falling Wedge Pattern |
| 5 | JBG SMITH Properties | NYSE: JBGS | $32.10 | $35.00 | Double Bottom Pattern, Downtrend Channel Pattern Breakout |
| 6 | BellRing Brands, Inc. | NYSE: BRBR | $21.40 | $23.00 | Ascending Triangle Pattern |
| 7 | Williams-Sonoma, Inc. | NYSE: WSM | $107.71 | $112.00 | Rising Wedge Pattern |
| 8 | Western Midstream Partners, LP | NYSE: WES | $13.53 | $14.30 | Breakout from an Ascending Triangle Pattern |
| 9 | Arvinas, Inc. | NASDAQ: AVRN | $23.20 | $28.60 | Downtrend Channel Pattern |
| 10 | Alcon Inc. | NYSE: ALC | $62.84 | $65.00 | IH&S 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 Acacia Communications, Inc. (NASDAQ: ACIA)
Sector: Technology | Communication Equipment
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 the consolidation area, the ideal buy level for ACIA is if the stock has a daily close above the resistance area of $69.70. This is marked in the chart below as a green color dotted line.
Daily chart – ACIA
Daily Chart – ACIA – Breakout from a Consolidation Area
#2 Ecopetrol S.A. (NYSE: EC)
Sector: Energy | Oil & Gas Integrated
Reason: Formation of a Double Bottom Pattern
A Double Bottom Pattern looks like the letter W and is characterized by two well-defined lows at approximately the same price level. This twice-touched low is usually a very strong support level. The high point between the two bottoms’ resistance level is called a neckline. Once a breakout happens from this key price level (neckline), it signifies the start of a bullish move.
Buy Level(s): The ideal buy level for EC is above the price of around $12.00. This is marked in the chart below as a green color dotted line.
Daily chart – EC
Daily Chart – EC – Double Bottom Pattern
#3 Workday, Inc. (NASDAQ: WDAY)
Sector: Technology | Software – Application
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 WDAY is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $233.00. This is marked in the chart below as a green color dotted line.
Daily chart – WDAY
Daily Chart – WDAY – Symmetrical Triangle Pattern
#4 Aprea Therapeutics, Inc. (NASDAQ: APRE)
Sector: Healthcare | Biotechnology
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 APRE is if the stock breaks out of the falling wedge pattern as well as close above the immediate resistance level of $25.60. This is marked in the chart below as a green color dotted line.
Daily chart – APRE
Daily Chart – APRE – Falling Wedge Pattern
#5 JBG SMITH Properties (NYSE: JBGS)
Sector: Real Estate | REIT – Office
Reason: Formation of a Double Bottom Pattern, Breakout from a Downtrend Channel
A Double Bottom Pattern looks like the letter W and is characterized by two well-defined lows at approximately the same price level. This twice-touched low is usually a very strong support level. The high point between the two bottoms’ resistance level is called a neckline. Once a breakout happens from this key price level (neckline), it signifies the start of a bullish move.
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): Even though the stock has broken out of a downtrend channel, the ideal buy level for JBGS is above the neckline of the double bottom pattern, at around $35.00. This is marked in the chart below as a green color dotted line.
Daily chart – JBGS
Daily Chart – JBGS – Downtrend Channel
#6 BellRing Brands, Inc. (NYSE: BRBR)
Sector: Consumer Defensive | Packaged Foods
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 BRBR is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $23.00. This is marked in the chart below as a green color dotted line.
Daily chart – BRBR
Daily Chart – BRBR – Ascending Triangle Pattern
#7 Williams-Sonoma, Inc. (NYSE: WSM)
Sector: Consumer Cyclical | Specialty Retail
Reason: Formation of a Rising Wedge Pattern
A rising wedge pattern is formed by the two converging trend lines when the price of the stock rises over a certain time period. This is typically considered a bearish pattern. However, a breakout from the upper rail of a rising wedge pattern is usually considered a bullish sign.
Buy Level(s): The ideal buy level for WSM is above the breakout level of the Rising Wedge Pattern. This translates to a price of around $112.00. This is marked in the chart below as a green color dotted line.
Daily chart – WSM
Daily Chart – WSM – Rising Wedge Pattern
#8 Western Midstream Partners, LP (NYSE: WES)
Sector: Energy | Oil & Gas Midstream
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): Even though the stock has broken out of an ascending triangle pattern, the ideal buy level for WES is if the stock has a daily close above the nearest resistance area of $14.30. This is marked in the chart below as a green color dotted line.
Daily chart – WES
Daily Chart – WES – Ascending Triangle Pattern
#9 Arvinas, Inc. (NASDAQ: AVRN)
Sector: Healthcare | Biotechnology
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 ideal buy level for ARVN is if the stock breaks out of the downtrend channel and has a daily close above the near-term resistance level of $28.60. This is marked in the chart below as a green color dotted line.
Daily chart – ARVN
Daily Chart – ARVN – Downtrend Channel
#10 Alcon Inc. (NYSE: ALC)
Sector: Healthcare | Medical Instruments & Supplies
Reason: Formation of an Inverted Head and Shoulders Pattern
An Inverted Head and Shoulders (IH&S) pattern is formed when price action within a downtrend traces a higher swing/pivot low than the previous one. The IH&S pattern is formed when the price of a stock falls to a trough and then rises, then falls below the recent trough and forms the head, and rises again. Finally, the price drops back but not as deep as the previous time. Once the last trough is made, the price action moves upward, toward the resistance level and breaks through. A breakout from the IH&S pattern is typically a strong bullish indication.
Buy Level(s): The ideal buy level for ALC is if the stock has a daily close above the breakout level of the IH&S pattern, at around $65.00. This is marked in the chart below as a green color dotted line.
Daily chart – ALC
Daily Chart – ALC- IH&S Pattern
Happy Trading!
Trades of The Day Research Team
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