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 | Baker Hughes Company | NYSE: BKR | $24.63 | $26.00 | Inverted Head and Shoulders Pattern |
| 2 | MoneyGram International, Inc. | NASDAQ: MGI | $8.03 | $13.10 | Consolidation Area |
| 3 | Nike Inc. | NYSE: NKE | $137.81 | $147.00 | Flag Pattern |
| 4 | Centene Corporation | NYSE: CNC | $70.45 | $71.10 | Consolidation Area |
| 5 | America Movil, S.A.B. de C.V. | NYSE: AMX | $14.81 | $15.10 | Ascending Triangle Pattern |
| 6 | HollyFrontier Corporation | NYSE: HFC | $35.65 | $37.70 | Symmetrical Triangle Pattern |
| 7 | Epizyme, Inc. | NASDAQ: EPZM | $8.29 | $8.80 | Falling Wedge Pattern |
| 8 | Nektar Therapeutics | NASDAQ: NKTR | $20.10 | $20.80 | Symmetrical Triangle Pattern Breakout |
| 9 | L Brands, Inc. | NYSE: LB | $67.29 | $68.50 | Flag Pattern |
| 10 | MoneyGram International, Inc. | NASDAQ: MGI | $8.03 | $8.50 | Consolidation Area |
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 Baker Hughes Company (NYSE: BKR)
Sector: Energy | Oil & Gas Equipment & 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 BKR is if the stock has a daily close above the breakout level of the IH&S pattern, at around $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – BKR
BKR – Inverted Head and Shoulders Pattern
#2 MoneyGram International, Inc. (NASDAQ: MGI)
Sector: Financial | Credit Services
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 TEN is if the stock has a daily close above the breakout level of the consolidation area, at around $13.10. This is marked in the chart below as a green color dotted line.
Daily chart – TEN
TEN – Consolidation Area
#3 Nike Inc. (NYSE: NKE)
Sector: Consumer Cyclical | Footwear & Accessories
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 NKE is if the stock breaks out of the flag pattern and closes above the resistance level of $147.00. This is marked in the chart below as a green color dotted line.
Daily chart – NKE
NKE – Flag Pattern
#4 Centene Corporation (NYSE: CNC)
Sector: Healthcare | Healthcare Plans
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 CNC is if the stock has a daily close above the breakout level of the consolidation area, at around $71.10. This is marked in the chart below as a green color dotted line.
Daily chart – CNC
CNC – Consolidation Area
#5 America Movil, S.A.B. de C.V. (NYSE: AMX)
Sector: Communication Services | Telecom Services
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 AMX is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $15.10. This is marked in the chart below as a green color dotted line.
Daily chart – AMX
AMX – Ascending Triangle Pattern
#6 HollyFrontier Corporation (NYSE: HFC)
Sector: Energy | Oil & Gas Refining & Marketing
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 HFC is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $37.70. This is marked in the chart below as a green color dotted line.
Daily chart – HFC
HFC – Symmetrical Triangle Pattern
#7 Epizyme, Inc. (NASDAQ: EPZM)
Sector: Healthcare | Biotechnology
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 EPZM is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $8.80. This is marked in the chart below as a green color dotted line.
Daily chart – EPZM
EPZM – Falling Wedge Pattern
#8 Nektar Therapeutics (NASDAQ: NKTR)
Sector: Healthcare | Biotechnology
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): Although the stock has currently broken out of a symmetrical triangle pattern, the ideal buy level for NKTR is above the resistance level of $20.80. This is marked in the chart below as a green color dotted line.
Daily chart – NKTR
NKTR – Symmetrical Triangle Pattern Breakout
#9 L Brands, Inc. (NYSE: LB)
Sector: Consumer Cyclical | Apparel Retail
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 LB is if the stock breaks out of the flag pattern and closes above the resistance level of $68.50. This is marked in the chart below as a green color dotted line.
Daily chart – LB
LB – Flag Pattern
#10 MoneyGram International, Inc. (NASDAQ: MGI)
Sector: Financial | Credit Services
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 MGI is if the stock has a daily close above the breakout level of the consolidation area, at around $8.50. This is marked in the chart below as a green color dotted line.
Daily chart – MGI
MGI – Consolidation Area
Happy Trading!
Trades of The Day Research Team
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