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 | Black Stone Minerals, L.P. | NYSE: BSM | $8.28 | $8.60 | Downtrend Channel Pattern Breakout |
| 2 | IDEAYA Biosciences, Inc. | NASDAQ: IDYA | $16.85 | $18.60 | Double Bottom Pattern |
| 3 | Zoom Video Communications, Inc. | NASDAQ: ZM | $384.53 | $408.00 | Falling Wedge Pattern |
| 4 | Exxon Mobil Corporation | NYSE: XOM | $47.89 | $55.00 | Double Bottom Pattern |
| 5 | Applied DNA Sciences, Inc. | NASDAQ: APDN | $11.00 | $12.10 | Downtrend Channel |
| 6 | Heartland Express, Inc. | NASDAQ: HTLD | $18.92 | $20.00 | Falling Wedge Pattern Breakout |
| 7 | Eagle Pharmaceuticals, Inc. | NASDAQ: EGRX | $50.67 | $51.80 | Inverted Head and Shoulders Pattern |
| 8 | Fox Corporation | NASDAQ: FOXA | $31.49 | $32.80 | Uptrend Channel |
| 9 | CSP Inc. | NASDAQ: CSPI | $11.43 | $11.60 | Double Bottom Pattern |
| 10 | Stamps.com Inc. | NASDAQ: STMP | $209.22 | $229.50 | 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 Black Stone Minerals, L.P. (NYSE: BSM)
Sector: Energy | Oil & Gas E&P
Reason: Breakout From 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 as a good bullish indication.
Buy Level(s): Although the stock has broken out of a downtrend channel, the ideal buy level for BSM is if the stock has a daily close above the near-term resistance level of $8.60. This is marked in the chart below as a green color dotted line.
Daily chart – BSM
BSM – Downtrend Channel Pattern Breakout
#2 IDEAYA Biosciences, Inc. (NASDAQ: IDYA)
Sector: Healthcare | Biotechnology
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 the 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 IDYA is above the neckline of the double bottom pattern, at around $18.60. This is marked in the chart below as a green color dotted line.
Daily chart – IDYA
IDYA – Double Bottom Pattern
#3 Zoom Video Communications, Inc. (NASDAQ: ZM)
Sector: Communication Services | Telecom Services
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 ZM is if the stock has a daily close above the breakout level of the falling wedge pattern, at around $408.00. This is marked in the chart below as a green color dotted line.
Daily chart – ZM
ZM – Falling Wedge Pattern
#4 Exxon Mobil Corporation (NYSE: XOM)
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 the 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 XOM is above the neckline of the double bottom pattern, at around $55.00. This is marked in the chart below as a green color dotted line.
Daily chart – XOM
XOM – Double Bottom Pattern
#5 Applied DNA Sciences, Inc. (NASDAQ: APDN)
Sector: Industrials | Security & Protection Services
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 as a good bullish indication.
Buy Level(s): The ideal buy level for APDN is if the stock has a daily close above the breakout level of the downtrend channel pattern, at around $12.10. This is marked in the chart below as a green color dotted line.
Daily chart – APDN
APDN – Downtrend Channel
#6 Heartland Express, Inc. (NASDAQ: HTLD)
Sector: Industrials | Trucking
Reason: Breakout From 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): Although the stock has broken out of the falling wedge pattern, the ideal buy level for HTLD is above the near-term resistance level of $20.00. This is marked in the chart below as a green color dotted line.
Daily chart – HTLD
HTLD – Falling Wedge Pattern Breakout
#7 Eagle Pharmaceuticals, Inc. (NASDAQ: EGRX)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Formation of an Inverted Head and Shoulders (IH&S) Pattern
An inverse head and shoulders pattern signifies the reversal of a downward trend. The pattern is formed when the price falls to a trough and then rises; then falls below the former trough and then rises again; and finally, the price falls again but not as far as the second trough and then rises again. The neckline of this pattern would be the resistance found near the top of the previous troughs. Once a breakout from this pattern occurs, it signifies a bullish trend.
Buy Level(s): The ideal buy level for EGRX is if the stock has a daily close above the breakout level of the IH&S pattern, at around $51.80. This is marked in the chart below as a green color dotted line.
Daily chart – EGRX
EGRX – Inverted Head and Shoulders Pattern
#8 Fox Corporation (NASDAQ: FOXA)
Sector: Communication Services | Broadcasting
Reason: Formation of an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for FOXA is if the stock has a daily close above the breakout level of the uptrend channel, at around $32.80. This is marked in the chart below as a green color dotted line.
Daily chart – FOXA
FOXA – Uptrend Channel
#9 CSP Inc. (NASDAQ: CSPI)
Sector: Technology | Information Technology Services
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 the 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 CSPI is above the neckline of the double bottom pattern, at around $11.60. This is marked in the chart below as a green color dotted line.
Daily chart – CSPI
CSPI – Double Bottom Pattern
#10 Stamps.com Inc. (NASDAQ: STMP)
Sector: Technology | Software – Application
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 STMP is if the stock breaks out of the falling wedge pattern as well as close above the immediate resistance level of $229.50. This is marked in the chart below as a green color dotted line.
Daily chart – STMP
STMP – Falling Wedge Pattern
Happy Trading!
— Trades of The Day Research Team
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