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 | Dollar General Corporation | NYSE: DG | $222.00 | $231.60 | Symmetrical Triangle Pattern |
| 2 | Keurig Dr Pepper Inc. | NASDAQ: KDP | $34.47 | $36.60 | Flag Pattern |
| 3 | Zillow Group, Inc. | NASDAQ: Z | $60.39 | $66.70 | Downtrend Channel |
| 4 | The Kroger Co. | NYSE: KR | $43.43 | $45.20 | Symmetrical Triangle Pattern Breakout |
| 5 | Lennar Corporation | NYSE: LEN | $112.32 | $113.50 | Double Bottom Pattern Breakout |
| 6 | TuSimple Holdings Inc. | NASDAQ: TSP | $37.99 | $41.70 | Symmetrical Triangle Pattern Breakout |
| 7 | Big Lots, Inc. | NYSE: BIG | $45.95 | $51.20 | Downtrend Channel |
| 8 | Kyndryl Holdings, Inc. | NYSE: KD | $18.63 | $18.70 | Falling Wedge Pattern Breakout |
| 9 | PLBY Group, Inc. | NASDAQ: PLBY | $35.49 | $40.20 | Symmetrical Triangle Pattern |
| 10 | AppLovin Corporation | NASDAQ: APP | $93.53 | $94.80 | Uptrend 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 Dollar General Corporation (NYSE: DG)
Sector: Consumer Defensive | Discount Stores
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 DG is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $231.60. This is marked in the chart below as a green color dotted line.
Daily chart – DG
DG – Symmetrical Triangle Pattern
#2 Keurig Dr Pepper Inc. (NASDAQ: KDP)
Sector: Consumer Defensive | Beverages – Non-Alcoholic
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 KDP is if the stock breaks out of the flag pattern, at around $36.60. This is marked in the chart below as a green color dotted line.
Daily chart – KDP
KDP – Flag Pattern
#3 Zillow Group, Inc. (NASDAQ: Z)
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 Z is if the stock breaks out of the downtrend channel and closes above the price of $66.70. This is marked in the chart below as a green color dotted line.
Daily chart – Z
Z – Downtrend Channel
#4 The Kroger Co. (NYSE: KR)
Sector: Consumer Defensive | Grocery Stores
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 KR is if the stock closes above the immediate resistance level of $45.20. This is marked in the chart below as a green color dotted line.
Daily chart – KR
KR – Symmetrical Triangle Pattern Breakout
#5 Lennar Corporation (NYSE: LEN)
Sector: Consumer Cyclical | Residential Construction
Reason: Breakout From 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 a neckline. Once a breakout happens from this key price level (neckline), it signifies the start of a bullish move.
Buy Level(s): The stock has currently broken out of the double bottom pattern. However, the ideal buy level for LEN is above the near-term resistance level of around $113.50. This is marked in the chart below as a green color dotted line.
Daily chart – LEN
LEN – Double Bottom Pattern Breakout
#6 TuSimple Holdings Inc. (NASDAQ: TSP)
Sector: Industrials | Trucking
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 TSP is if the stock closes above the immediate resistance level of $41.70. This is marked in the chart below as a green color dotted line.
Daily chart – TSP
TSP – Symmetrical Triangle Pattern Breakout
#7 Big Lots, Inc. (NYSE: BIG)
Sector: Consumer Defensive | Discount Stores
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 BIG is if the stock breaks out of the downtrend channel and closes above the price of $51.20. This is marked in the chart below as a green color dotted line.
Daily chart – BIG
BIG – Downtrend Channel
#8 Kyndryl Holdings, Inc. (NYSE: KD)
Sector: Technology | Information Technology Services
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 KD is above the nearest resistance level of $18.70. This is marked in the chart below as a green color dotted line.
Daily chart – KD
KD – Falling Wedge Pattern Breakout
#9 PLBY Group, Inc. (NASDAQ: PLBY)
Sector: Consumer Cyclical | Leisure
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 PLBY is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $40.20. This is marked in the chart below as a green color dotted line.
Daily chart – PLBY
PLBY – Symmetrical Triangle Pattern
#10 AppLovin Corporation (NASDAQ: APP)
Sector: Technology | Software – Application
Reason: Formation of an Uptrend Channel
An uptrend channel or an ascending channel is the price action contained between upward sloping 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 uptrend channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for APP is if the stock breaks out of the uptrend channel and has a daily close above $94.80. This is marked in the chart below as a green color dotted line.
Daily chart – APP
APP – Uptrend Channel
Happy Trading!
Trades of The Day Research Team
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