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 | GSX Techedu Inc. | NYSE: GSX | $92.00 | $101.00 | Downtrend Channel |
| 2 | Takeda Pharmaceutical Company Limited | NYSE: TAK | $18.13 | $20.00 | Inverted Head and Shoulders Pattern |
| 3 | Repay Holdings Corporation | NASDAQ: RPAY | $24.69 | $28.00 | Consolidation Area |
| 4 | Viemed Healthcare, Inc. | NASDAQ: VMD | $8.62 | $9.55 | Falling Wedge Pattern |
| 5 | The Home Depot, Inc. | NYSE: HD | $284.00 | $291.00 | Flag Pattern |
| 6 | Brown & Brown, Inc. | NYSE: BRO | $47.49 | $48.50 | Ascending Triangle Pattern |
| 7 | Community Healthcare Trust Incorporated | NYSE: CHCT | $49.14 | $51.50 | Flag Pattern |
| 8 | Invitation Homes Inc. | NYSE: INVH | $30.02 | $30.70 | Ascending Triangle Pattern |
| 9 | Agree Realty Corporation | NYSE: ADC | $64.84 | $68.00 | Descending Triangle Pattern |
| 10 | KKR Real Estate Finance Trust Inc. | NYSE: KREF | $17.89 | $19.00 | Ascending Triangle 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 GSX Techedu Inc. (NYSE: GSX)
Sector: Consumer Defensive | Education & Training 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 GSX is if the stock breaks out of the downtrend channel and has a daily close above the near-term resistance level of $101.00. This is marked in the chart below as a green color dotted line.
Daily chart – GSX
GSX – Downtrend Channel
#2 Takeda Pharmaceutical Company Limited (NYSE: TAK)
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 TAK is if the stock has a daily close above the breakout level of the IH&S pattern, at around $20.00. This is marked in the chart below as a green color dotted line.
Daily chart – TAK
TAK – Inverted Head and Shoulders Pattern
#3 Repay Holdings Corporation (NASDAQ: RPAY)
Sector: Technology | Software – Infrastructure
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 RPAY is if the stock has a daily close above the breakout level of the consolidation area, at around $28.00. This is marked in the chart below as a green color dotted line.
Daily chart – RPAY
RPAY -Consolidation Area
#4 Viemed Healthcare, Inc. (NASDAQ: VMD)
Sector: Healthcare | Medical Devices
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 VMD is if the stock breaks out of the falling wedge pattern as well as close above the immediate resistance level of $9.55. This is marked in the chart below as a green color dotted line.
Daily chart – VMD
VMD – Falling Wedge Pattern
#5 The Home Depot, Inc. (NYSE: HD)
Sector: Consumer Cyclical | Home Improvement Retail
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 HD is if the stock has a daily close above the breakout level of the flag pattern and closes above the immediate resistance level of $291.00. This is marked in the chart below as a green color dotted line.
Daily chart – HD
HD – Flag Pattern
#6 Brown & Brown, Inc. (NYSE: BRO)
Sector: Financial | Insurance Brokers
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 BRO is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $48.50. This is marked in the chart below as a green color dotted line.
Daily chart – BRO
BRO – Ascending Triangle Pattern
#7 Community Healthcare Trust Incorporated (NYSE: CHCT)
Sector: Real Estate | REIT – Healthcare Facilities
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 CHCT is if the stock has a daily close above the breakout level of the flag pattern, at around $51.50. This is marked in the chart below as a green color dotted line.
Daily chart – CHCT
CHCT – Flag Pattern
#8 Invitation Homes Inc. (NYSE: INVH)
Sector: Real Estate | REIT – Residential
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 INVH is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $30.70. This is marked in the chart below as a green color dotted line.
Daily chart – INVH
INVH – Ascending Triangle Pattern
#9 Agree Realty Corporation (NYSE: ADC)
Sector: Real Estate | REIT – Retail
Reason: Formation of a Descending Triangle Pattern
A descending triangle pattern is formed by drawing a falling trendline that connects a series of lower highs and a horizontal line along a series of lows. These two lines result in the formation of a triangle. This is usually a bearish pattern. However, any upward breakout from a bearish pattern like a Descending Triangle is a strong bullish sign.
Buy Level(s): The ideal buy level for ADC is if the stock breaks out of the descending triangle pattern and has a daily close above the breakout level, at around $68.00. This is marked in the chart below as a green color dotted line.
Daily chart – ADC
ADC – Descending Triangle Pattern
#10 KKR Real Estate Finance Trust Inc. (NYSE: KREF)
Sector: Real Estate | REIT – Mortgage
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 KREF is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $19.00. This is marked in the chart below as a green color dotted line.
Daily chart – KREF
KREF – Ascending Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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