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 | Grupo Aval Acciones y Valores S.A. | NYSE: AVAL | $5.91 | $6.20 | Downtrend Channel |
| 2 | Altria Group, Inc. | NYSE: MO | $49.76 | $52.60 | Ascending Triangle Pattern |
| 3 | Kontoor Brands, Inc. | NYSE: KTB | $64.01 | $68.00 | Flag Pattern |
| 4 | Hawaiian Holdings, Inc. | NASDAQ: HA | $28.83 | $30.30 | Ascending Triangle Pattern |
| 5 | Alaska Air Group, Inc. | NYSE: ALK | $65.48 | $74.50 | Consolidation Area |
| 6 | Just Eat Takeaway.com N.V. American Depositary Shares | NYSE: GRUB | $61.05 | $69.00 | Downtrend Channel |
| 7 | Pioneer Natural Resources Company | NYSE: PXD | $162.90 | $173.00 | Ascending Triangle Pattern |
| 8 | The Cheesecake Factory Incorporated | NASDAQ: CAKE | $56.08 | $65.00 | Consolidation Area |
| 9 | Novan, Inc. | NASDAQ: NOVN | $14.68 | $15.30 | Falling Wedge Pattern Breakout |
| 10 | V.F. Corporation | NYSE: VFC | $82.13 | $91.00 | 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 Grupo Aval Acciones y Valores S.A. (NYSE: AVAL)
Sector: Financial | Banks – Regional
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 AVAL is if the stock has a daily close above the breakout level of the downtrend channel, at around $6.20. This is marked in the chart below as a green color dotted line.
Daily chart – AVAL
AVAL – Downtrend Channel
#2 Altria Group, Inc. (NYSE: MO)
Sector: Consumer Defensive | Tobacco
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 MO is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $52.60. This is marked in the chart below as a green color dotted line.
Daily chart – MO
MO – Ascending Triangle Pattern
#3 Kontoor Brands, Inc. (NYSE: KTB)
Sector: Consumer Cyclical | Apparel Manufacturing
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 KTB is if the stock has a daily close above the breakout level of the flag pattern, at around $68.00. This is marked in the chart below as a green color dotted line.
Daily chart – KTB
KTB – Flag Pattern
#4 Hawaiian Holdings, Inc. (NASDAQ: HA)
Sector: Industrials | Airlines
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 HA is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $30.30. This is marked in the chart below as a green color dotted line.
Daily chart – HA
HA – Ascending Triangle Pattern
#5 Alaska Air Group, Inc. (NYSE: ALK)
Sector: Industrials | Airlines
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 ALK is if the stock has a daily close above the breakout level of the consolidation area, at around $74.50. This is marked in the chart below as a green color dotted line.
Daily chart – ALK
ALK – Consolidation Area
#6 Just Eat Takeaway.com N.V. American Depositary Shares (NYSE: GRUB)
Sector: Communication Services | Internet Content & Information
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 GRUB is if the stock has a daily close above the breakout level of the downtrend channel, at around $69.00. This is marked in the chart below as a green color dotted line.
Daily chart – GRUB
GRUB – Downtrend Channel Pattern
#7 Pioneer Natural Resources Company (NYSE: PXD)
Sector: Energy | Oil & Gas E&P
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 PXD is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $173.00. This is marked in the chart below as a green color dotted line.
Daily chart – PXD
PXD – Ascending Triangle Pattern
#8 The Cheesecake Factory Incorporated (NASDAQ: CAKE)
Sector: Consumer Cyclical | Restaurants
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 CAKE is if the stock has a daily close above the breakout level of the consolidation area, at around $65.00. This is marked in the chart below as a green color dotted line.
Daily chart – CAKE
CAKE – Consolidation Area
#9 Novan, Inc. (NASDAQ: NOVN)
Sector: Healthcare | Biotechnology
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 NOVN is above the immediate resistance level of $15.30. This is marked in the chart below as a green color dotted line.
Daily chart – NOVN
NOVN – Falling Wedge Pattern Breakout
#10 V.F. Corporation (NYSE: VFC)
Sector: Consumer Cyclical | Apparel Manufacturing
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 VFC is if the stock has a daily close above the breakout level of the consolidation area, at around $91.00. This is marked in the chart below as a green color dotted line.
Daily chart – VFC
VFC – Consolidation Area
Happy Trading!
Trades of The Day Research Team
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