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 | Bed Bath & Beyond Inc. | NASDAQ: BBBY | $27.99 | $33.00 | Consolidation Area |
| 2 | Ulta Beauty, Inc. | NASDAQ: ULTA | $345.36 | $358.00 | Ascending Triangle Pattern |
| 3 | Canopy Growth Corporation | NASDAQ: CGC | $26.09 | $27.50 | Falling Wedge Pattern Breakout |
| 4 | Canadian National Railway Company | NYSE: CNI | $112.57 | $119.00 | Double Bottom Pattern |
| 5 | Venator Materials PLC | NYSE: VNTR | $4.97 | $5.50 | Consolidation Area |
| 6 | MoSys, Inc. | NASDAQ: MOSY | $5.26 | $5.60 | Downtrend Channel |
| 7 | Cronos Group Inc. | NASDAQ: CRON | $9.01 | $9.20 | Falling Wedge Pattern Breakout |
| 8 | Petco Health and Wellness Company, Inc. | NASDAQ: WOOF | $22.65 | $26.00 | Ascending Triangle Pattern |
| 9 | U.S. Silica Holdings, Inc. | NYSE: SLCA | $10.26 | $13.50 | Symmetrical Triangle Pattern |
| 10 | HEXO Corp. | NYSE: HEXO | $7.19 | $7.60 | Downtrend Channel |
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 Bed Bath & Beyond Inc. (NASDAQ: BBBY)
Sector: Consumer Cyclical | Specialty Retail
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 BBBY is if the stock has a daily close above the breakout level of the consolidation area, at around $33.00. This is marked in the chart below as a green color dotted line.
Daily chart – BBBY
BBBY – Consolidation Area
#2 Ulta Beauty, Inc. (NASDAQ: ULTA)
Sector: Consumer Cyclical | Specialty 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 ULTA is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $358.00. This is marked in the chart below as a green color dotted line.
Daily chart – ULTA
ULTA – Ascending Triangle Pattern
#3 Canopy Growth Corporation (NASDAQ: CGC)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Falling Wedge Pattern Breakout
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 stock has currently broken out of a falling wedge pattern. However, the ideal buy level for CGC is above the nearest resistance level of $27.50. This is marked in the chart below as a green color dotted line.
Daily chart – CGC
CGC – Falling Wedge Pattern Breakout
#4 Canadian National Railway Company (NYSE: CNI)
Sector: Industrials | Railroads
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 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 CNI is if the stock has a daily close above the breakout level of the double bottom pattern, at around $119.00. This is marked in the chart below as a green color dotted line.
Daily chart – CNI
CNI – Double Bottom Pattern
#5 Venator Materials PLC (NYS: VNTR)
Sector: Basic Materials | Specialty Chemicals
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 VNTR is if the stock has a daily close above the breakout level of the consolidation area, at around $5.50. This is marked in the chart below as a green color dotted line.
Daily chart – VNTR
VNTR – Consolidation Area
#6 MoSys, Inc. (NASDAQ: MOSY)
Sector: Technology | Semiconductors
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 MOSY is if the stock has a daily close above the breakout level of the downtrend channel and closes above the near-term resistance level of $5.60. This is marked in the chart below as a green color dotted line.
Daily chart – MOSY
MOSY – Downtrend Channel
#7 Cronos Group Inc. (NASDAQ: CRON)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Falling Wedge Pattern Breakout
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 stock has currently broken out of a falling wedge pattern. However, the ideal buy level for CRON is above the nearest resistance level of $9.20. This is marked in the chart below as a green color dotted line.
Daily chart – CRON
CRON – Falling Wedge Pattern Breakout
#8 Petco Health and Wellness Company, Inc. (NASDAQ: WOOF)
Sector: Consumer Cyclical | Specialty 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 WOOF is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – WOOF
WOOF – Ascending Triangle Pattern
#9 U.S. Silica Holdings, Inc. (NYSE: SLCA)
Sector: Energy | Oil & Gas Equipment & Services
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 SLCA is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $13.50. This is marked in the chart below as a green color dotted line.
Daily chart – SLCA
SLCA – Symmetrical Triangle Pattern
#10 HEXO Corp. (NYSE: HEXO)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
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 HEXO is if the stock has a daily close above the breakout level of the downtrend channel and closes above the near-term resistance level of $7.60. This is marked in the chart below as a green color dotted line.
Daily chart – HEXO
HEXO – Downtrend Channel
Happy Trading!
— Trades of The Day Research Team
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