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 | Regal Beloit Corporation | NYSE: RBC | $138.70 | $143.00 | Ascending Triangle Pattern |
| 2 | Verizon Communications Inc. | NYSE: VZ | $56.00 | $57.50 | Falling Wedge Pattern |
| 3 | LGI Homes, Inc. | NASDAQ: LGIH | $125.14 | $130.50 | Downtrend Channel |
| 4 | La-Z-Boy Incorporated | NYSE: LZB | $41.35 | $43.70 | Flag Pattern |
| 5 | Simpson Manufacturing Co., Inc. | NYSE: SSD | $100.38 | $105.00 | Ascending Triangle Pattern |
| 6 | Atmos Energy Corporation | NYSE: ATO | $91.71 | $94.00 | Falling Wedge Pattern |
| 7 | Shenandoah Telecommunications Company | NASDAQ: SHEN | $47.93 | $50.00 | Downtrend Channel |
| 8 | TC PipeLines, LP | NYSE: TCP | $30.21 | $32.00 | Symmetrical Triangle Pattern |
| 9 | Conagra Brands, Inc. | NYSE: CAG | $35.50 | $36.00 | Downtrend Channel |
| 10 | Boingo Wireless, Inc. | NASDAQ: WIFI | $14.07 | $16.00 | Inverted Head and Shoulders 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 Regal Beloit Corporation (NYSE: RBC)
Sector: Industrials | Specialty Industrial Machinery
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 RBC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $143.00. This is marked in the chart below as a green color dotted line.
Daily chart – RBC
RBC – Ascending Triangle Pattern
#2 Verizon Communications Inc. (NYSE: VZ)
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 VZ is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $57.50. This is marked in the chart below as a green color dotted line.
Daily chart – VZ
VZ – Falling Wedge Pattern
#3 LGI Homes, Inc. (NASDAQ: LGIH)
Sector: Consumer Cyclical | Residential Construction
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 LGIH is if the stock has a daily close above the breakout level of the downtrend channel, at around $130.50. This is marked in the chart below as a green color dotted line.
Daily chart – LGIH
LGIH – Downtrend Channel
#4 La-Z-Boy Incorporated (NYSE: LZB
Sector: Consumer Cyclical | Furnishings, Fixtures & Appliances
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 LZB is if the stock has a daily close above the breakout level of the flag pattern, at around $43.70. This is marked in the chart below as a green color dotted line.
Daily chart – LZB
LZB – Flag Pattern
#5 Simpson Manufacturing Co., Inc. (NYSE: SSD)
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 SSD is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $105.00. This is marked in the chart below as a green color dotted line.
Daily chart – SSD
SSD- Ascending Triangle Pattern
#6 Atmos Energy Corporation (NYSE: ATO)
Sector: Utilities | Utilities – Regulated Gas
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 ATO is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $94.00. This is marked in the chart below as a green color dotted line.
Daily chart – ATO
ATO – Falling Wedge Pattern
#7 Shenandoah Telecommunications Company (NASDAQ: SHEN)
Sector: Communication Services | Telecom 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 a good bullish indication.
Buy Level(s): The ideal buy level for SHEN is if the stock has a daily close above the breakout level of the downtrend channel, at around $50.00. This is marked in the chart below as a green color dotted line.
Daily chart – SHEN
SHEN – Downtrend Channel
#8 TC PipeLines, LP (NYSE: TCP)
Sector: Energy | Oil & Gas Midstream
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 TCP is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $32.00. This is marked in the chart below as a green color dotted line.
Daily chart – TCP
TCP – Symmetrical Triangle Pattern
#9 Conagra Brands, Inc. (NYSE: CAG)
Sector: Consumer Defensive | Packaged Foods
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 CAG is if the stock has a daily close above the breakout level of the downtrend channel, at around $36.00. This is marked in the chart below as a green color dotted line.
Daily chart – CAG
CAG – Downtrend Channel
#10 Boingo Wireless, Inc. (NASDAQ: WIFI)
Sector: Communication Services | Telecom Services
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 WIFI is above the breakout level of the IH&S pattern at around $16.00. This is marked in the chart below as a green color dotted line.
Daily chart – WIFI
WIFI – Inverted Head And Shoulders Pattern
Happy Trading!
Trades of The Day Research Team