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 | Deckers Outdoor Corporation | NYSE: DECK | $271.85 | $279.70 | Falling Wedge Pattern Breakout |
| 2 | Blue Owl Capital Inc. | NYSE: OWL | $12.39 | $13.50 | Downtrend Channel |
| 3 | nLIGHT, Inc. | NASDAQ: LASR | $11.75 | $14.30 | Falling Wedge Pattern |
| 4 | Livent Corporation | NYSE: LTHM | $34.49 | $34.70 | Flag Pattern Breakout |
| 5 | Bank of America Corporation | NYSE: BAC | $37.02 | $38.60 | Falling Wedge Pattern Breakout |
| 6 | Dell Technologies Inc. | NYSE: DELL | $49.58 | $50.00 | Downtrend Channel Breakout |
| 7 | Aspen Aerogels, Inc. | NYSE: ASPN | $18.50 | $23.80 | Falling Wedge Pattern |
| 8 | Cenovus Energy Inc. | NYSE: CVE | $22.67 | $22.70 | Uptrend Channel Breakout |
| 9 | LegalZoom.com, Inc. | NASDAQ: LZ | $12.85 | $13.30 | Falling Wedge Pattern |
| 10 | Opendoor Technologies Inc. | NASDAQ: OPEN | $7.49 | $8.20 | Falling Wedge 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 Deckers Outdoor Corporation (NYSE: DECK)
Sector: Consumer Cyclical | Footwear & Accessories
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 DECK is above the nearest resistance level of $279.70. This is marked in the chart below as a green color dotted line.
Daily chart – DECK
DECK – Falling Wedge Pattern Breakout
#2 Blue Owl Capital Inc. (NYSE: OWL)
Sector: Financial | Asset Management
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 daily chart shows that the stock is currently forming a downtrend channel. The ideal buy level for OWL is if the stock breaks out of the downtrend channel and has a daily close above $13.50. This is marked in the chart below as a green color dotted line.
Daily chart – OWL
OWL – Downtrend Channel
#3 nLIGHT, Inc. (ASDAQ: LASR)
Sector: Technology | Semiconductors
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 LASR is if the stock breaks out of the falling wedge pattern, at a price of around $14.30. This is marked in the chart below as a green color dotted line.
Daily chart – LASR
LASR – Falling Wedge Pattern
#4 Livent Corporation (NYSE: LTHM)
Sector: Basic Materials | Specialty Chemicals
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 LTHM is above the near-term resistance level of $34.70. This is marked in the chart below as a green color dotted line.
Daily chart – LTHM
LTHM – Flag Pattern Breakout
#5 Bank of America Corporation (NYSE: BAC)
Sector: Financial | Banks – Diversified
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 BAC is above the nearest resistance level of $38.60. This is marked in the chart below as a green color dotted line.
Daily chart – BAC
BAC – Falling Wedge Pattern Breakout
#6 Dell Technologies Inc. (NYSE: DELL)
Sector: Technology | Computer Hardware
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 DELL is if the stock has a daily close above $50.00. This is marked in the chart below as a green color dotted line.
Daily chart – DELL
DELL – Downtrend Channel Breakout
#7 Aspen Aerogels, Inc. (NYSE: ASPN)
Sector: Industrials | Building Products & Equipment
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 ASPN is if the stock breaks out of the falling wedge pattern, at a price of around $23.80. This is marked in the chart below as a green color dotted line.
Daily chart – ASPN
ASPN – Falling Wedge Pattern
#8 Cenovus Energy Inc. (NYSE: CVE)
Sector: Energy | Oil & Gas Integrated
Reason: Breakout From 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 stock has currently broken out of the uptrend channel. However, the ideal buy level for CVE is if the stock has a daily close above the near-term resistance level of $22.70. This is marked in the chart below as a green color dotted line.
Daily chart – CVE
CVE – Uptrend Channel Breakout
#9 LegalZoom.com, Inc. (NASDAQ: LZ)
Sector: Industrials | Specialty Business Services
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 LZ is if the stock breaks out of the falling wedge pattern, at a price of around $13.30. This is marked in the chart below as a green color dotted line.
Daily chart – LZ
LZ – Falling Wedge Pattern
#10 Opendoor Technologies Inc. (NASDAQ: OPEN)
Sector: Real Estate | Real Estate 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 OPEN is above the nearest resistance level of $8.20. This is marked in the chart below as a green color dotted line.
Daily chart – OPEN
OPEN – Falling Wedge Pattern Breakout
Happy Trading!
— Trades of The Day Research Team
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