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 | Western Digital Corporation | NASDAQ: WDC | $70.63 | $73.50 | Ascending Triangle Pattern |
| 2 | Regional Health Properties, Inc. | AMEX: RHE | $7.22 | $7.60 | Consolidation Area |
| 3 | Vaxart, Inc. | NASDAQ: VXRT | $10.78 | $15.90 | Double Bottom Pattern |
| 4 | OneMain Holdings, Inc. | NYSE: OMF | $56.87 | $57.50 | Flag Pattern |
| 5 | South Jersey Industries, Inc. | NYSE: SJI | $4.75 | $29.80 | Inverted Head and Shoulders Pattern |
| 6 | Carter’s, Inc. | NYSE: CRI | $108.79 | $112.00 | Ascending Triangle Pattern |
| 7 | Companhia de Saneamento Basico do Estado de Sao Paulo | NYSE: SBS | $7.86 | $8.60 | Falling Wedge Pattern Breakout |
| 8 | Arcutis Biotherapeutics, Inc. | NASDAQ: ARQT | $33.50 | $36.70 | Inverted Head and Shoulders Pattern |
| 9 | Community Bank System, Inc. | NYSE: CBU | $77.63 | $83.40 | Flag Pattern |
| 10 | CryoLife, Inc. | NYSE: CRY | $29.18 | $30.50 | 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 Western Digital Corporation (NASDAQ: WDC)
Sector: Technology | Computer Hardware
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 WDC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $73.50. This is marked in the chart below as a green color dotted line.
Daily chart – WDC
WDS – Ascending Triangle Pattern
#2 Regional Health Properties, Inc. (AMEX: RHE)
Sector: Healthcare | Medical Care Facilities
Reason: Formation of a Consolidation Area
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 RHE is if the stock has a daily close above the breakout level of the consolidation area, at around $7.60. This is marked in the chart below as a green color dotted line.
Daily chart – RHE
RHE – Consolidation Area
#3 Vaxart, Inc. (NASDAQ: VXRT)
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 level is called a 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 VXRT is above the neckline of the double bottom pattern, at around $15.90. This is marked in the chart below as a green color dotted line.
Daily chart – VXRT
VXRT – Double Bottom Pattern
#4 OneMain Holdings, Inc. (NYSE: OMF)
Sector: Financial | Credit Services
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 OMF is if the stock has a daily close above the breakout level of the flag pattern, at around $57.50. This is marked in the chart below as a green color dotted line.
Daily chart – OMF
OMF – Flag Pattern
#5 South Jersey Industries, Inc. (NYSE: SJI)
Sector: Utilities | Utilities – Diversified
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 SJI is if the stock has a daily close above the breakout level of the inverted head and shoulders pattern, at around $29.80. This is marked in the chart below as a green color dotted line.
Daily chart – SJI
SJI – Inverted Head and Shoulders Pattern
#6 Carter’s, Inc. (NYSE: CRI)
Sector: Consumer Cyclical | Apparel Retail
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 CRI is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $112.00. This is marked in the chart below as a green color dotted line.
Daily chart – CRI
CRI – Ascending Triangle Pattern
#7 Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE: SBS)
Sector: Utilities | Utilities – Regulated Water
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): Even though the stock has broken out of a falling wedge pattern, the ideal buy level for SBS is above the immediate resistance level of $8.60. This is marked in the chart below as a green color dotted line.
Daily chart – SBS
SBS – Falling Wedge Pattern Breakout
#8 Arcutis Biotherapeutics, Inc. (NASDAQ: ARQT)
Sector: Healthcare | Biotechnology
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 ARQT is if the stock has a daily close above the breakout level of the inverted head and shoulders pattern, at around $36.70. This is marked in the chart below as a green color dotted line.
Daily chart – ARQT
AQRT – Inverted Head and Shoulders Pattern
#9 Community Bank System, Inc. (NYSE: CBU)
Sector: Financial | Banks – Regional
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 CBU is if the stock has a daily close above the breakout level of the flag pattern, at around $83.40. This is marked in the chart below as a green color dotted line.
Daily chart – CBU
CBU – Flag Pattern
#10 CryoLife, Inc. (NYSE: CRY)
Sector: Healthcare | Medical Devices
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 CRY is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $30.50. This is marked in the chart below as a green color dotted line.
Daily chart – CRY
CRY – Ascending Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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