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 | Duolingo, Inc. | NASDAQ: DUOL | $89.77 | $96.00 | Falling Wedge Pattern Breakout |
| 2 | PulteGroup, Inc. | NYSE: PHM | $42.53 | $44.00 | Downtrend Channel Breakout |
| 3 | Dynavax Technologies Corporation | NASDAQ: DVAX | $9.60 | $10.00 | Falling Wedge Pattern Breakout |
| 4 | The Southern Company | NYSE: SO | $73.65 | $74.60 | Flag Pattern |
| 5 | NICE Ltd. | NASDAQ: NICE | $202.86 | $211.60 | Falling Wedge Pattern |
| 6 | Sierra Wireless, Inc. | NASDAQ: SWIR | $20.62 | $21.00 | Ascending Triangle Pattern Breakout |
| 7 | Rivian Automotive, Inc. | NASDAQ: RIVN | $26.70 | $35.20 | Falling Wedge Pattern |
| 8 | Squarespace, Inc. | NYSE: SQSP | $22.91 | $26.00 | Falling Wedge Pattern Breakout |
| 9 | Twist Bioscience Corporation | NASDAQ: TWST | $34.29 | $36.40 | Falling Wedge Pattern Breakout |
| 10 | Veru Inc. | NASDAQ: VERU | $13.00 | $13.30 | Downtrend Channel 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 Duolingo, Inc. (NASDAQ: DUOL)
Sector: Technology | Software – Application
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 DUOL is above the nearest resistance level of $96.00. This is marked in the chart below as a green color dotted line.
Daily chart – DUOL
DUOL – Falling Wedge Pattern Breakout
#2 PulteGroup, Inc. (NYSE: PHM)
Sector: Consumer Cyclical | Residential Construction
Reason: Downtrend Channel Breakout
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 daily chart shows that the stock has currently broken out of a downtrend channel. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for PHM is if the stock has a daily close above $44.00. This is marked in the chart below as a green color dotted line.
Daily chart – PHM
PHM – Downtrend Channel Breakout
#3 Dynavax Technologies Corporation (NASDAQ: DVAX)
Sector: Healthcare | Biotechnology
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 DVAX is above the nearest resistance level of $10.00. This is marked in the chart below as a green color dotted line.
Daily chart – DVAX
DVAX – Falling Wedge Pattern Breakout
#4 The Southern Company (NYSE: SO)
Sector: Utilities | Utilities – Regulated Electric
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 SO is if the stock breaks out of the flag pattern, at around $74.60. This is marked in the chart below as a green color dotted line.
Daily chart – SO
SO – Flag Pattern
#5 NICE Ltd. (NASDAQ: NICE)
Sector: Technology | Software – Application
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 NICE is if the stock breaks out of the falling wedge pattern, at a price of around $211.60. This is marked in the chart below as a green color dotted line.
Daily chart – NICE
NICE – Falling Wedge Pattern
#6 Sierra Wireless, Inc. (NASDAQ: SWIR)
Sector: Technology | Communication Equipment
Reason: Breakout From 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): Although the stock has broken out of the ascending triangle pattern, the ideal buy level for SWIR is if the stock has a daily close above the near-term resistance level of $21.00. This is marked in the chart below as a green color dotted line.
Daily chart – SWIR
SWIR – Ascending Triangle Pattern Breakout
#7 Rivian Automotive, Inc. (NASDAQ: RIVN)
Sector: Consumer Cyclical | Auto Manufacturers
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 RIVN is if the stock breaks out of the falling wedge pattern, at a price of around $35.20. This is marked in the chart below as a green color dotted line.
Daily chart – RIVN
RIVN – Falling Wedge Pattern
#8 Squarespace, Inc. (NYSE: SQSP)
Sector: Technology | Software – Infrastructure
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 SQSP is above the nearest resistance level of $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – SQSP
SQSP – Falling Wedge Pattern Breakout
#9 Twist Bioscience Corporation (NASDAQ: TWST)
Sector: Healthcare | Diagnostics & Research
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 TWST is above the nearest resistance level of $36.40. This is marked in the chart below as a green color dotted line.
Daily chart – TWST
TWST – Falling Wedge Pattern Breakout
#10 Veru Inc. (NASDAQ: VERU)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Downtrend Channel Breakout
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 daily chart shows that the stock has currently broken out of a downtrend channel. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for VERU is if the stock has a daily close above $13.30. This is marked in the chart below as a green color dotted line.
Daily chart – VERU
VERU – Downtrend Channel Breakout
Happy Trading!
Trades of The Day Research Team
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