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 | Healthcare Services Group, Inc. | NASDAQ: HCSG | $14.33 | $14.80 | Falling Wedge Pattern Breakout |
| 2 | Americold Realty Trust, Inc. | NYSE: COLD | $31.84 | $32.70 | Symmetrical Triangle Pattern |
| 3 | Sigma Lithium Corporation | NASDAQ: SGML | $29.48 | $32.30 | Flag Pattern |
| 4 | Paramount Global | NASDAQ: PARA | $23.69 | $25.30 | Symmetrical Triangle Pattern |
| 5 | Essential Properties Realty Trust, Inc. | NYSE: EPRT | $25.89 | $26.00 | Ascending Triangle Pattern Breakout |
| 6 | Cardinal Health, Inc. | NYSE: CAH | $78.78 | $81.30 | Flag Pattern |
| 7 | Roku, Inc. | NASDAQ: ROKU | $71.56 | $74.00 | Symmetrical Triangle Pattern Breakout |
| 8 | Oil States International, Inc. | NYSE: OIS | $9.75 | $10.50 | Breakout From Consolidation Area |
| 9 | Merck & Co., Inc. | NYSE: MRK | $109.52 | $110.40 | Flag Pattern |
| 10 | Silicon Motion Technology Corporation | NASDAQ: SIMO | $69.63 | $70.30 | 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 Healthcare Services Group, Inc. (NASDAQ: HCSG)
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 HCSG is above the nearest resistance level of $14.80. This is marked in the chart below as a green color dotted line.
Daily chart – HCSG
HCSG – Falling Wedge Pattern Breakout
#2 Americold Realty Trust, Inc. (NYSE: COLD)
Sector: Real Estate | REIT – Industrial
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 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 COLD is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $32.70. This is marked in the chart below as a green color dotted line.
Daily chart – COLD
COLD – Symmetrical Triangle Pattern
#3 Sigma Lithium Corporation (NASDAQ: SGML)
Sector: Basic Materials | Other Industrial Metals & Mining
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 SGML is if the stock breaks out of the flag pattern, at around $32.30. This is marked in the chart below as a green color dotted line.
Daily chart – SGML
SGML – Flag Pattern
#4 Paramount Global (NASDAQ: PARA)
Sector: Communication Services | Entertainment
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 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 PARA is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $25.30. This is marked in the chart below as a green color dotted line.
Daily chart – PARA
PARA – Symmetrical Triangle Pattern
#5 Essential Properties Realty Trust, Inc. (NYSE: EPRT)
Sector: Real Estate | REIT – Diversified
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 EPRT is if the stock has a daily close above the near-term resistance level of $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – EPRT
EPRT – Ascending Triangle Pattern Breakout
#6 Cardinal Health, Inc. (NYSE: CAH)
Sector: Healthcare | Medical Distribution
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 CAH is if the stock breaks out of the flag pattern, at around $81.30. This is marked in the chart below as a green color dotted line.
Daily chart – CAH
CAH – Flag Pattern
#7 Roku, Inc. (NASDAQ: ROKU)
Sector: Communication Services | Entertainment
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 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 ROKU is if the stock closes above the immediate resistance level of $74.00. This is marked in the chart below as a green color dotted line.
Daily chart – ROKU
ROKU – Symmetrical Triangle Pattern Breakout
#8 Oil States International, Inc. (NYSE: OIS)
Sector: Energy | Oil & Gas Equipment & Services
Reason: Breakout From 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): Although the stock has currently broken out of a consolidation area, the ideal buy level for OIS is above the near-term resistance area, which translates to a price of around $10.50. This is marked in the chart below as a green color dotted line.
Daily chart – OIS
OIS – Breakout From Consolidation Area
#9 Merck & Co., Inc. (NYSE: MRK)
Sector: Healthcare | Drug Manufacturers – General
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 MRK is if the stock breaks out of the flag pattern, at around $110.40. This is marked in the chart below as a green color dotted line.
Daily chart – MRK
MRK – Flag Pattern
#10 Silicon Motion Technology Corporation (NASDAQ: SIMO)
Sector: Technology | Semiconductors
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 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 SIMO is if the stock closes above the immediate resistance level of $70.30. This is marked in the chart below as a green color dotted line.
Daily chart – SIMO
SIMO – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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