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 | Clover Health Investments, Corp. | NASDAQ: CLOV | $8.82 | $10.30 | Falling Wedge Pattern |
| 2 | Atlantica Sustainable Infrastructure plc | NASDAQ: AY | $39.04 | $40.30 | Downtrend Channel Breakout |
| 3 | RealPage, Inc. | NASDAQ: RP | $88.57 | $89.30 | Consolidation Area |
| 4 | Centrais Eletricas Brasileiras S.A. | NYSE: EBR | $6.31 | $6.80 | Falling Wedge Pattern |
| 5 | Amphenol Corporation | NYSE: APH | $68.48 | $69.00 | Ascending Triangle Pattern |
| 6 | Verint Systems Inc. | NASDAQ: VRNT | $48.64 | $49.50 | Flag Pattern Breakout |
| 7 | Global Medical REIT Inc. | NYSE: GMRE | $14.30 | $14.70 | Ascending Triangle Pattern |
| 8 | Sanofi | NASDAQ: SNY | $51.30 | $51.90 | Consolidation Area |
| 9 | Magellan Midstream Partners, L.P. | NYSE: MMP | $45.45 | $47.50 | Ascending Triangle Pattern |
| 10 | QTS Realty Trust, Inc. | NYSE: QTS | $65.47 | $68.00 | Double Bottom 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 Clover Health Investments, Corp. (NASDAQ: CLOV)
Sector: Healthcare | Healthcare Plans
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 CLOV is if the stock breaks out of the falling wedge pattern at around $10.30. This is marked in the chart below as a green color dotted line.
Daily chart – CLOV
CLOV – Falling Wedge Pattern
#2 Atlantica Sustainable Infrastructure plc (NASDAQ: AY)
Sector: Utilities | Utilities – Renewable
Reason: Breakout from 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): Although the stock has broken out of the downtrend channel, the ideal buy level for AY is above the near-term resistance level of $40.30. This is marked in the chart below as a green color dotted line.
Daily chart – AY
AY – Downtrend Channel Breakout
#3 RealPage, Inc. (NASDAQ: RP)
Sector: Technology | Software – Application
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 RP is if the stock breaks out of the consolidation area and closes above the near-term resistance level of $89.30. This is marked in the chart below as a green color dotted line.
Daily chart – RP
RP – Consolidation Area
#4 Centrais Eletricas Brasileiras S.A. (NYSE: EBR)
Sector: Utilities | Utilities – Regulated Electric
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 EBR is if the stock breaks out of the falling wedge pattern at around $6.80. This is marked in the chart below as a green color dotted line.
Daily chart – EBR
EBR – Falling Wedge Pattern
#5 Amphenol Corporation (NYSE: APH)
Sector: Technology | Electronic Components
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 APH is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $69.00. This is marked in the chart below as a green color dotted line.
Daily chart – APH
APH – Ascending Triangle Pattern
#6 Verint Systems Inc. (NASDAQ: VRNT)
Sector: Technology | Software – Infrastructure
Reason: Breakout From 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): Although the stock has broken out of the flag pattern, the ideal buy level for VRNT is if the stock has a daily close above the near-term resistance level of around $49.50. This is marked in the chart below as a green color dotted line.
Daily chart – VRNT
VRNT – Flag Pattern Breakout
#7 Global Medical REIT Inc. (NYSE: GMRE)
Sector: Real Estate | REIT – Healthcare Facilities
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 GMRE is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $14.70. This is marked in the chart below as a green color dotted line.
Daily chart – GMRE
GMRE – Ascending Triangle Pattern
#8 Sanofi (NASDAQ: SNY)
Sector: Healthcare | Drug Manufacturers – General
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 SNY is if the stock breaks out of the consolidation area and closes above the near-term resistance level of $51.90. This is marked in the chart below as a green color dotted line.
Daily chart – SNY
SNY – Consolidation Area
#9 Magellan Midstream Partners, L.P. (NYSE: MMP)
Sector: Energy | Oil & Gas Midstream
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 MMP is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $47.50. This is marked in the chart below as a green color dotted line.
Daily chart – MMP
MMY – Ascending Triangle Pattern
#10 QTS Realty Trust, Inc. (NYSE: QTS)
Sector: Real Estate | REIT – Industrial
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 QTS is if the stock breaks out above the neckline of the double bottom pattern and closes above the resistance level of $68.00. This is marked in the chart below as a green color dotted line.
Daily chart – QTS
MMY – Double Bottom Pattern
Happy Trading!
Trades of The Day Research Team
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