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 | Inovio Pharmaceuticals, Inc. | NASDAQ: INO | $12.75 | $14.00 | Consolidation Area, Downtrend Channel Breakout |
| 2 | Facebook, Inc. | NASDAQ: FB | $258.33 | $286.00 | Pennant Pattern |
| 3 | Oracle Corporation | NYSE: ORCL | $60.43 | $63.40 | Double Bottom Pattern |
| 4 | Telefonaktiebolaget LM Ericsson | NASDAQ: ERIC | $12.47 | $13.00 | Ascending Triangle Pattern |
| 5 | Central Garden & Pet Company | NASDAQ: CENTA | $39.00 | $40.70 | Consolidation Area |
| 6 | Carrier Global Corporation | NYSE: CARR | $38.50 | $40.00 | Ascending Triangle Pattern |
| 7 | CoreCivic, Inc. | NYSE: CXW | $7.11 | $8.00 | Downtrend Channel |
| 8 | L.B. Foster Company | NASDAQ: FSTR | $15.15 | $16.00 | Ascending Triangle Pattern |
| 9 | Kellogg Company | NYSE: K | $58.94 | $63.50 | Falling Wedge Pattern |
| 10 | XBiotech Inc. | NASDAQ: XBIT | $18.73 | $20.00 | Downtrend Channel |
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 Inovio Pharmaceuticals, Inc. (NASDAQ: INO)
Sector: Healthcare | Biotechnology
Reason: Formation of a Consolidation Area, Breakout From a Downtrend Channel
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.
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 the downtrend channel, the ideal buy level for INO is if it has a daily close above the breakout level of the consolidation area, at around $14.00. This is marked in the chart below as a green color dotted line.
Daily chart – INO
INO – Consolidation Area, Downtrend Channel Breakout
#2 Facebook, Inc. (NASDAQ: FB)
Sector: Communication Services | Internet Content & Information
Reason: Formation of a Pennant Pattern
A pennant 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 FB is if the stock has a daily close above the breakout level of the pennant pattern, at around $286.00. This is marked in the chart below as a green color dotted line.
Daily chart – FB
FB – Pennant Pattern
#3 Oracle Corporation (NYSE: ORCL)
Sector: Technology | Software – Infrastructure
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 ORCL is if the stock has a daily close above the breakout level of the double bottom pattern, at around $63.40. This is marked in the chart below as a green color dotted line.
Daily chart – ORCL
ORCL – Double Bottom Pattern
#4 Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC)
Sector: Technology | Communication Equipment
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 ERIC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $13.00. This is marked in the chart below as a green color dotted line.
Daily chart – ERIC
ERIC – Ascending Triangle Pattern
#5 Central Garden & Pet Company (NASDAQ: CENTA)
Sector: Consumer Defensive | Packaged Foods
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 CENTA is if the stock has a daily close above the breakout level of the consolidation area, at around $40.70. This is marked in the chart below as a green color dotted line.
Daily chart – CENTA
CENTA – Consolidation Area
#6 Carrier Global Corporation (NYSE: CARR)
Sector: Industrials | Building Products & Equipment
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 CARR is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $42.00. This is marked in the chart below as a green color dotted line.
Daily chart – CARR
CARR – Ascending Triangle Pattern
#7 CoreCivic, Inc. (NYSE: CXW)
Sector: Real Estate | REIT – Specialty
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 CXW is if the stock has a daily close above the breakout level of the downtrend channel, at around $8.00. This is marked in the chart below as a green color dotted line.
Daily chart – CXW
CXW – Downtrend Channel
#8 L.B. Foster Company (NASDAQ: FSTR)
Sector: Industrials | Railroads
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 FSTR is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $16.00. This is marked in the chart below as a green color dotted line.
Daily chart – FSTR
FSTR – Ascending Triangle Pattern
#9 Kellogg Company (NYSE: K)
Sector: Consumer Defensive | Packaged Foods
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 K is if the stock breaks out of the falling wedge pattern as well as close above the immediate resistance level of $63.50. This is marked in the chart below as a green color dotted line.
Daily chart – K
K – Falling Wedge Pattern
#10 XBiotech Inc. (NASDAQ: XBIT)
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 as a good bullish indication.
Buy Level(s): The ideal buy level for XBIT is if the stock has a daily close above the breakout level of the downtrend channel and closes above the immediate resistance area, at around $20.00. This is marked in the chart below as a green color dotted line.
Daily chart – XBIT
XBIT – Downtrend Channel
Happy Trading!
Trades of The Day Research Team
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