The Top 10 Stocks to Watch This Week for Possible Breakouts

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 Canadian National Railway Company NYSE: CNI $109.32 $112.50 Trend Channel
2 Armstrong Flooring, Inc. NYSE: AFI $5.18 $5.60 Ascending Triangle Pattern
3 Sage Therapeutics, Inc. NASDAQ: SAGE $85.00 $89.30 Flag Pattern
4 Luther Burbank Corporation NASDAQ: LBC $10.21 $10.70 Ascending Triangle Pattern
5 salesforce.com, inc. NYSE: CRM $216.50 $252.00 Downtrend Channel
6 Starbucks Corporation NASDAQ: SBUX $108.03 $109.00 Ascending Triangle Pattern
7 Saga Communications, Inc. NASDAQ: SGA $20.68 $24.00 Inverted Head and Shoulders Pattern
8 Rocket Companies, Inc. NYSE: RKT $21.85 $24.80 Consolidation Area
9 Etsy, Inc. NASDAQ: ETSY $220.27 $239.00 Uptrend Channel
10 Gates Industrial Corporation plc NYSE: GTES $15.00 $18.30 Uptrend 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 Canadian National Railway Company (NYSE: CNI)

Sector: Industrials | Railroads

Reason: Formation of a Trend Channel

A trend channel is the price action contained between 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 channel before finally breaking out from the upper rail.

Buy Level(s): The ideal buy level for CNI is if the stock has a daily close above the breakout level of the trend channel, at around $112.50. This is marked in the chart below as a green color dotted line.

Daily chart – CNI

CNI – Trend Channel

#2 Armstrong Flooring, Inc. (NYSE: AFI)

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 AFI is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $5.60. This is marked in the chart below as a green color dotted line.

Daily chart – AFI

AFI – Ascending Triangle Pattern

#3 Sage Therapeutics, Inc. (NASDAQ: SAGE)

Sector: Healthcare | Biotechnology

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 SAGE is if the stock has a daily close above the breakout level of the flag pattern, at around $89.30. This is marked in the chart below as a green color dotted line.

Daily chart – SAGE

SAGE – Flag Pattern

#4 Luther Burbank Corporation (NASDAQ: LBC)

Sector: Financial | Banks – Regional

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 LBC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $10.70. This is marked in the chart below as a green color dotted line.

Daily chart – LBC

LBC – Ascending Triangle Pattern

#5 salesforce.com, inc. (NYSE: CRM)

Sector: Technology | Software – Application

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 CRM is if the stock has a daily close above the breakout level of the downtrend channel, at around $252.00. This is marked in the chart below as a green color dotted line.

Daily chart – CRM

CRM – Downtrend Channel

#6 Starbucks Corporation (NASDAQ: SBUX)

Sector: Consumer Cyclical | Restaurants

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 SBUX is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $109.00. This is marked in the chart below as a green color dotted line.

Daily chart – SBUX

SBUX – Ascending Triangle Pattern

#7 Saga Communications, Inc. (NASDAQ: SGA)

Sector: Communication Services | Broadcasting

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 SGA is if the stock has a daily close above the breakout level of the IH&S pattern, at around $24.00. This is marked in the chart below as a green color dotted line.

Daily chart – SGA

SGA – Inverted Head and Shoulders Pattern

#8 Rocket Companies, Inc. (NYSE: RKT)

Sector: Financial | Mortgage Finance

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 RKT is if the stock has a daily close above the breakout level of the consolidation area and closes above the price of around $24.80. This is marked in the chart below as a green color dotted line.

Daily chart – RKT

RKT – Consolidation Area

#9 Etsy, Inc. (NASDAQ: ETSY)

Sector: Consumer Cyclical | Internet Retail

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 ETSY is if the stock has a daily close above the breakout level of the uptrend channel, at around $239.00. This is marked in the chart below as a green color dotted line.

Daily chart – ETSY

ETSY – Uptrend Channel

#10 Gates Industrial Corporation plc (NYSE: GTES)

Sector: Industrials | Specialty Industrial Machinery

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 GTES is if the stock has a daily close above the breakout level of the uptrend channel, at around $18.30. This is marked in the chart below as a green color dotted line.

Daily chart – GTES

GTES – Uptrend Channel

Happy Trading!

Trades of The Day Research Team

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