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 | Resolute Forest Products Inc. | NYSE: RFP | $10.34 | $10.65 | Flag Pattern |
| 2 | GenMark Diagnostics, Inc. | NASDAQ: GNMK | $24.16 | $24.50 | Inverted Head and Shoulders Pattern |
| 3 | Lumentum Holdings Inc. | NASDAQ: LITE | $91.93 | $95.80 | Falling Wedge Pattern Breakout |
| 4 | Denbury Inc. | NYSE: DEN | $45.42 | $46.50 | Double Bottom Pattern |
| 5 | Criteo S.A. | NASDAQ: CRTO | $32.74 | $35.60 | Flag Pattern |
| 6 | O-I Glass, Inc. | NYSE: OI | $14.49 | $14.90 | Uptrend Channel |
| 7 | Green Brick Partners, Inc. | NASDAQ: GRBK | $22.61 | $25.00 | Flag Pattern |
| 8 | Henry Schein, Inc. | NASDAQ: HSIC | $67.98 | $71.80 | Ascending Triangle Pattern |
| 9 | Edgewell Personal Care Company | NYSE: EPC | $38.53 | $41.00 | Inverted Head and Shoulders Pattern |
| 10 | Helius Medical Technologies, Inc. | NASDAQ: HSDT | $18.12 | $22.50 | Falling Wedge Pattern Breakout |
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 Resolute Forest Products Inc. (NYSE: RFP)
Sector: Basic Materials | Paper & Paper Products
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 RFP is if the stock has a daily close above the breakout level of the flag pattern, at around $10.65. This is marked in the chart below as a green color dotted line.
Daily chart – RFP
RFP – Flag Pattern
#2 GenMark Diagnostics, Inc. (NASDAQ: GNMK)
Sector: Healthcare | Medical Devices
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 GNMK is if the stock has a daily close above the breakout level of the IH&S pattern, at around $24.50. This is marked in the chart below as a green color dotted line.
Daily chart – GNMK
GNMK- Inverted Head and Shoulders Pattern
#3 Lumentum Holdings Inc. (NASDAQ: LITE)
Sector: Technology | Communication Equipment
Reason: Breakout From 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): Although the stock has broken out of the falling wedge pattern, the ideal buy level for LITE is if the stock closes above the immediate resistance level of $95.80. This is marked in the chart below as a green color dotted line.
Daily chart – LITE
LITE – Falling Wedge Pattern Breakout
#4 Denbury Inc. (NYSE: DEN)
Sector: Energy | Oil & Gas E&P
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 DEN is above the neckline of the double bottom pattern and above the near-term resistance area of around $46.50. This is marked in the chart below as a green color dotted line.
Daily chart – DEN
DEN – Double Bottom Pattern
#5 Criteo S.A. (NASDAQ: CRTO)
Sector: Communication Services | Advertising Agencies
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 CRTO is if the stock has a daily close above the breakout level of the flag pattern, at around $35.60. This is marked in the chart below as a green color dotted line.
Daily chart – CRTO
CRTO – Flag Pattern
#6 O-I Glass, Inc. (NYSE: OI)
Sector: Consumer Cyclical | Packaging & Containers
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 OI is if the stock has a daily close above the breakout level of the uptrend channel, at around $14.90. This is marked in the chart below as a green color dotted line.
Daily chart – OI
OI – Uptrend Channel
#7 Green Brick Partners, Inc. (NASDAQ: GRBK)
Sector: Consumer Cyclical | Residential Construction
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 GRBK is if the stock has a daily close above the breakout level of the flag pattern, at around $25.00. This is marked in the chart below as a green color dotted line.
Daily chart – GRBK
GRBK – Flag Pattern
#8 Henry Schein, Inc. (NASDAQ: HSIC)
Sector: Healthcare | Medical Distribution
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 HSIC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $71.80. This is marked in the chart below as a green color dotted line.
Daily chart – HSIC
HSIC – Ascending Triangle Pattern
#9 Edgewell Personal Care Company (NYSE: EPC)
Sector: Consumer Defensive | Household & Personal Products
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 EPC is if the stock has a daily close above the breakout level of the IH&S pattern, at around $41.00. This is marked in the chart below as a green color dotted line.
Daily chart – EPC
EPC – Inverted Head and Shoulders Pattern
#10 Helius Medical Technologies, Inc. (NASDAQ: HSDT)
Sector: Healthcare | Medical Devices
Reason: Breakout From 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): Although the stock has broken out of the falling wedge pattern, the ideal buy level for HSDT is if the stock closes above the immediate resistance level of $22.50. This is marked in the chart below as a green color dotted line.
Daily chart – HSDT
HSDT – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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