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 | Rexford Industrial Realty, Inc. | NYSE: REXR | $49.57 | $52.00 | Consolidation Area |
| 2 | Amgen Inc. | NASDAQ: AMGN | $245.94 | $262.00 | Ascending Triangle Pattern |
| 3 | Paychex, Inc. | NASDAQ: PAYX | $95.84 | $100.00 | Symmetrical Triangle Pattern Breakout |
| 4 | AdaptHealth Corp. | NASDAQ: AHCO | $37.12 | $41.70 | Flag Pattern |
| 5 | Merck & Co., Inc. | NYSE: MRK | $77.51 | $85.90 | Downtrend Channel |
| 6 | Rollins, Inc. | NYSE: ROL | $33.78 | $36.80 | Falling Wedge Pattern |
| 7 | Sutro Biopharma, Inc. | NASDAQ: STRO | $24.96 | $28.00 | Double Bottom Pattern |
| 8 | Kimberly-Clark Corporation | NYSE: KMB | $130.32 | $136.00 | Falling Wedge Pattern |
| 9 | Norwood Financial Corp. | NASDAQ: NWFL | $28.04 | $30.00 | Ascending Triangle Pattern |
| 10 | Utah Medical Products, Inc. | NASDAQ: UTMD | $86.96 | $94.60 | 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 Rexford Industrial Realty, Inc. (NYSE: REXR)
Sector: Real Estate | REIT – Industrial
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 REXR is if the stock has a daily close above the breakout level of the consolidation area, at around $52.00. This is marked in the chart below as a green color dotted line.
Daily chart – REXR
REXR – Consolidation Area
#2 Amgen Inc. (NASDAQ: AMGN)
Sector: Healthcare | Drug Manufacturers – General
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 AMGN is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $262.00. This is marked in the chart below as a green color dotted line.
Daily chart – AMGN
AMGN – Ascending Triangle Pattern
#3 Paychex, Inc. (NASDAQ: PAYX)
Sector: Industrials | Staffing & Employment Services
Reason: Breakout from 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 daily chart shows that the stock has currently broken out of a symmetrical triangle pattern. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for PAYX is if the stock has a daily close above $100.00. This is marked in the chart below as a green color dotted line.
Daily chart – PAYX
PAYX – Symmetrical Triangle Pattern Breakout
#4 AdaptHealth Corp. (NASDAQ: AHCO)
Sector: Healthcare | Medical Devices
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 AHCO is if the stock breaks out of the flag pattern and closes above the resistance level of $41.70. This is marked in the chart below as a green color dotted line.
Daily chart – AHCO
AHCO – Flag Pattern
#5 Merck & Co., Inc. (NYSE: MRK)
Sector: Healthcare | Drug Manufacturers – General
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 MRK is if the stock has a daily close above the breakout level of the downtrend channel, at around $85.90. This is marked in the chart below as a green color dotted line.
Daily chart – MRK
MRK – Downtrend Channel
#6 Rollins, Inc. (NYSE: ROL)
Sector: Consumer Cyclical | Personal 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 ROL is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $36.80. This is marked in the chart below as a green color dotted line.
Daily chart – ROL
ROL – Falling Wedge Pattern
#7 Sutro Biopharma, Inc. (NASDAQ: STRO)
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 levels 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 STRO is if the stock breaks out above the neckline of the double bottom pattern and closes above the resistance level of $28.00. This is marked in the chart below as a green color dotted line.
Daily chart – STRO
STRO – Double Bottom Pattern
#8 Kimberly-Clark Corporation (NYSE: KMB)
Sector: Consumer Defensive | Household & Personal Products
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 KMB is if the stock breaks out of the falling wedge pattern, at a price of around $136.00. This is marked in the chart below as a green color dotted line.
Daily chart – KMB
KMB – Falling Wedge Pattern
#9 Norwood Financial Corp. (NASDAQ: NWFL)
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 NWFL is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $30.00. This is marked in the chart below as a green color dotted line.
Daily chart – NWFL
MWFL – Ascending Triangle Pattern
#10 Utah Medical Products, Inc. (NASDAQ: UTMD)
Sector: Healthcare | Medical Instruments & Supplies
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 UTMD is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $94.60. This is marked in the chart below as a green color dotted line.
Daily chart – UTMD
UTMD – Ascending Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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