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 | Sequential Brands Group, Inc. | NASDAQ: SQBG | $15.70 | $16.50 | Downtrend Channel |
| 2 | Barnes & Noble Education, Inc. | NYSE: BNED | $8.47 | $10.00 | Cup and Handle Pattern |
| 3 | Digital Turbine, Inc. | NASDAQ: APPS | $68.27 | $81.80 | Trend Channel |
| 4 | Atreca, Inc. | NASDAQ: BCEL | $8.95 | $9.10 | Falling Wedge Pattern |
| 5 | Sogou Inc. | NYSE: SOGO | $8.66 | $8.70 | Ascending Triangle Pattern |
| 6 | Acuity Brands, Inc. | NYSE: AYI | $178.73 | $195.50 | Consolidation Area |
| 7 | Wabash National Corporation | NYSE: WNC | $14.45 | $16.80 | Downtrend Channel |
| 8 | Trident Acquisitions Corp. | NASDAQ: TDAC | $13.36 | $13.60 | Consolidation Area |
| 9 | Suzano S.A. | NYSE: SUZ | $11.75 | $12.50 | Downtrend Channel |
| 10 | Twin Disc, Incorporated | NASDAQ: TWIN | $14.75 | $15.70 | 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 Sequential Brands Group, Inc. (NASDAQ: SQBG)
Sector: Consumer Cyclical | Apparel Manufacturing
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 SQBG is if the stock has a daily close above the breakout level of the downtrend channel, at around $16.50. This is marked in the chart below as a green color dotted line.
Daily chart – SQBG
SQBG – Downtrend Channel Pattern
#2 Barnes & Noble Education, Inc. (NYSE: BNED)
Sector: Consumer Cyclical | Specialty Retail
Reason: Formation of a Cup and Handle Pattern in Weekly Chart
A Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. A Cup and Handle pattern is formed when the price initially declines, then levels off, and begins to rise again, forming a rounded cup-like structure. The handle is then formed near the rim or lip of the cup, either sideways or declining price channel. A breakout from a cup and handle pattern is a strong bullish indication as it signifies the start of a new bullish trend.
Buy Level(s): The ideal buy level for BNED is if the stock has a daily close above the breakout level of the cup and handle pattern, at around $10.00. This is marked in the chart below as a green color dotted line.
Daily chart – BNED
BNED – Cup and Handle Pattern
#3 Digital Turbine, Inc. (NASDAQ: APPS)
Sector: Technology | Software – Application
Reason: Formation of a Trend Channel
A trend channel is the price action contained between parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for APPS is if the stock has a daily close above the breakout level of the trend channel, at around $81.80. This is marked in the chart below as a green color dotted line.
Daily chart – APPS
APPS -Trend Channel
#4 Atreca, Inc. (NASDAQ: BCEL)
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 BCEL is if the stock breaks out of the falling wedge pattern as well as closes above the immediate resistance level of $9.10. This is marked in the chart below as a green color dotted line.
Daily chart – BCEL
BCEL _ Falling Wedge Pattern
#5 Sogou Inc. (NYSE: SOGO)
Sector: Communication Services | Internet Content & Information
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 SOGO is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $8.70. This is marked in the chart below as a green color dotted line.
Daily chart – SOGO
SOGO – Ascending Triangle Pattern
#6 Acuity Brands, Inc. (NYSE: AYI)
Sector: Industrials | Electrical Equipment & Parts
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 AYI is if the stock has a daily close above the breakout level of the consolidation area and closes above the price of around $195.50. This is marked in the chart below as a green color dotted line.
Daily chart – AYI
AYI – Consolidation Area
#7 Wabash National Corporation (NYSE: WNC)
Sector: Industrials | Farm & Heavy Construction Machinery
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 WNC is if the stock has a daily close above the breakout level of the downtrend channel, at around $15.80. This is marked in the chart below as a green color dotted line.
Daily chart – WNC
WNC – Downtrend Channel Pattern
#8 Trident Acquisitions Corp. (NASDAQ: TDAC)
Sector: Financial | Shell Companies
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 TDAC is if the stock has a daily close above the breakout level of the consolidation area and closes above the price of around $13.60. This is marked in the chart below as a green color dotted line.
Daily chart – TDAC
TDAC – Consolidation Area
#9 Suzano S.A. (NYSE: SUZ)
Sector: Basic Materials | Paper & Paper Products
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 SUZ is if the stock has a daily close above the breakout level of the downtrend channel, at around $12.50. This is marked in the chart below as a green color dotted line.
Daily chart – SUZ
SUZ – – Downtrend Channel Pattern
#10 Twin Disc, Incorporated (NASDAQ: TWIN)
Sector: Industrials | Specialty Industrial Machinery
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 TWIN is if the stock has a daily close above the breakout level of the consolidation area and closes above the price of around $15.70. This is marked in the chart below as a green color dotted line.
Daily chart – TWIN
TWIN – Consolidation Area
Happy Trading!
— Trades of The Day Research Team