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 | Mattel, Inc. | NASDAQ: MAT | $20.45 | $22.60 | Flag Pattern |
| 2 | Whirlpool Corporation | NYSE: WHR | $213.44 | $235.00 | Symmetrical Triangle Pattern |
| 3 | COMPASS Pathways plc | NYSE: CMPS | $38.89 | $41.00 | Falling Wedge Pattern Breakout |
| 4 | U.S. Bancorp | NYSE: USB | $62.74 | $63.00 | Flag Pattern |
| 5 | Hello Group Inc. | NASDAQ: MOMO | $13.31 | $14.50 | Downtrend Channel |
| 6 | Tri Pointe Homes, Inc. | NYSE: TPH | $24.54 | $25.70 | Symmetrical Triangle Pattern Breakout |
| 7 | The Simply Good Foods Company | NASDAQ: SMPL | $37.27 | $38.00 | Flag Pattern Breakout |
| 8 | Seagate Technology Holdings plc | NASDAQ: STX | $87.23 | $94.30 | Falling Wedge Pattern Breakout |
| 9 | Applied Materials, Inc. | NASDAQ: AMAT | $135.93 | $144.10 | Consolidation Area |
| 10 | Cleveland-Cliffs Inc. | NYSE: CLF | $23.85 | $25.00 | Symmetrical Triangle Pattern Breakout |
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 Mattel, Inc. (NASDAQ: MAT)
Sector: Consumer Cyclical | Leisures
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 MAT is if the stock breaks out of the flag pattern, at around $22.60. This is marked in the chart below as a green color dotted line.
Daily chart – MAT
MAT – Flag Pattern
#2 Whirlpool Corporation (NYSE: WHR)
Sector: Consumer Cyclical | Furnishings, Fixtures & Appliances
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 WHR is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $235.00. This is marked in the chart below as a green color dotted line.
Daily chart – WHR
WHR – Symmetrical Triangle Pattern
#3 COMPASS Pathways plc (NYSE: CMPS)
Sector: Healthcare | Medical Care Facilities
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 CMPS is above the nearest resistance level of $41.00. This is marked in the chart below as a green color dotted line.
Daily chart – CMPS
CMPS – Falling Wedge Pattern Breakout
#4 U.S. Bancorp (NYSE: USB)
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 USB is if the stock breaks out of the flag pattern, at around $63.00. This is marked in the chart below as a green color dotted line.
Daily chart – USB
USB – Flag Pattern
#5 Hello Group Inc. (NASDAQ: MOMO)
Sector: Communication Services | Internet Content & Information
Reason: Downtrend Channel Pattern
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 MOMO is if the stock breaks out of the downtrend channel and closes above the price of $14.50. This is marked in the chart below as a green color dotted line.
Daily chart – MOMO
MOMO – Downtrend Channel
#6 Tri Pointe Homes, Inc. (NYSE: TPH)
Sector: Consumer Cyclical | Residential Construction
Reason: Symmetrical Triangle Pattern Breakout
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 stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for TPH is if the stock closes above the immediate resistance level of $25.70. This is marked in the chart below as a green color dotted line.
Daily chart – TPH
TPH – Symmetrical Triangle Pattern Breakout
#7 The Simply Good Foods Company (NASDAQ: SMPL)
Sector: Consumer Defensive | Packaged Foods
Reason: Breakout From 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): Although the stock has currently broken out of the flag pattern, the ideal buy level for SMPL is above the near-term resistance level of $38.00. This is marked in the chart below as a green color dotted line.
Daily chart – SMPL
SMPL – Flag Pattern Breakout
#8 Seagate Technology Holdings plc (NASDAQ: STX)
Sector: Technology | Computer Hardware
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 STX is above the nearest resistance level of $94.30. This is marked in the chart below as a green color dotted line.
Daily chart – STX
STX – Falling Wedge Pattern Breakout
#9 Applied Materials, Inc. (NASDAQ: AMAT)
Sector: Technology | Semiconductor Equipment & Materials
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 AMAT is if the stock has a daily close above the breakout level of the consolidation area, at around $144.10. This is marked in the chart below as a green color dotted line.
Daily chart – AMAT
AMAT – Consolidation Area
#10 Cleveland-Cliffs Inc. (NYSE: CLF)
Sector: Basic Materials | Steel
Reason: Symmetrical Triangle Pattern Breakout
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 stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for CLF is if the stock closes above the immediate resistance level of $25.00. This is marked in the chart below as a green color dotted line.
Daily chart – CLF
CLF – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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