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 | Kornit Digital Ltd. | NASDAQ: KRNT | $18.24 | $18.70 | Falling Wedge Pattern Breakout |
| 2 | Privia Health Group, Inc. | NASDAQ: PRVA | $29.09 | $29.90 | Symmetrical Triangle Pattern Breakout |
| 3 | Gates Industrial Corporation plc | NYSE: GTES | $14.09 | $14.40 | Flag Pattern Breakout |
| 4 | ImmunityBio, Inc. | NASDAQ: IBRX | $5.54 | $6.40 | Downtrend Channel Breakout |
| 5 | Lemonade, Inc. | NYSE: LMND | $14.64 | $14.80 | Falling Wedge Pattern Breakout |
| 6 | StoneCo Ltd. | NASDAQ: STNE | $13.60 | $14.00 | Breakout From Consolidation Area |
| 7 | Live Nation Entertainment, Inc. | NYSE: LYV | $77.16 | $81.80 | Falling Wedge Pattern Breakout |
| 8 | ZipRecruiter, Inc. | NYSE: ZIP | $17.17 | $17.70 | Symmetrical Triangle Pattern Breakout |
| 9 | TechnipFMC plc | NYSE: FTI | $14.25 | $14.40 | Flag Pattern Breakout |
| 10 | XP Inc. | NASDAQ: XP | $14.91 | $15.60 | Falling Wedge Pattern |
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 Kornit Digital Ltd. (NASDAQ: KRNT)
Sector: Industrials | Specialty Industrial Machinery
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 KRNT is above the nearest resistance level of $18.70. This is marked in the chart below as a green color dotted line.
Daily chart – KRNT
KRNT – Falling Wedge Pattern Breakout
#2 Privia Health Group, Inc. (NASDAQ: PRVA)
Sector: Healthcare | Health Information Services
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 PRVA is if the stock closes above the immediate resistance level of $29.90. This is marked in the chart below as a green color dotted line.
Daily chart – PRVA
PRVA – Symmetrical Triangle Pattern Breakout
#3 Gates Industrial Corporation plc (NYSE: GTES)
Sector: Industrials | Specialty Industrial Machinery
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 GTES is above the near-term resistance level of $14.40. This is marked in the chart below as a green color dotted line.
Daily chart – GTES
GTES – Flag Pattern Breakout
#4 ImmunityBio, Inc. (NASDAQ: IBRX)
Sector: Healthcare | Biotechnology
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 IBRX is if the stock has a daily close above $6.40. This is marked in the chart below as a green color dotted line.
Daily chart – IBRX
IBRX – Downrend Channel Breakout
#5 Lemonade, Inc. (NYSE: LMND)
Sector: Financial | Insurance – Property & Casualty
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 LMND is above the nearest resistance level of $14.80. This is marked in the chart below as a green color dotted line.
Daily chart – LMND
LMND – Falling Wedge Pattern Breakout
#6 StoneCo Ltd. (NASDAQ: STNE)
Sector: Technology | Software – Infrastructure
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 STNE is above the near-term resistance area, which translates to a price of around $14.00. This is marked in the chart below as a green color dotted line.
Daily chart – STNE
STNE – Breakout From Consolidation Area
#7 Live Nation Entertainment, Inc. (NYSE: LYV)
Sector: Communication Services | Entertainment
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 LYV is above the nearest resistance level of $81.80. This is marked in the chart below as a green color dotted line.
Daily chart – LYV
LYV – Falling Wedge Pattern Breakout
#8 ZipRecruiter, Inc. (NYSE: ZIP)
Sector: Industrials | Staffing & Employment Services
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 ZIP is if the stock closes above the immediate resistance level of $17.70. This is marked in the chart below as a green color dotted line.
Daily chart – ZIP
ZIP – Symmetrical Triangle Pattern Breakout
#9 TechnipFMC plc (NYSE: FTI)
Sector: Energy | Oil & Gas Equipment & Services
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 FTI is above the near-term resistance level of $14.40. This is marked in the chart below as a green color dotted line.
Daily chart – FTI
FTI – Flag Pattern Breakout
#10 XP Inc. (NASDAQ: XP)
Sector: Financial | Capital Markets
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 XP is if the stock breaks out of the falling wedge pattern, at a price of around $15.60. This is marked in the chart below as a green color dotted line.
Daily chart – XP
XP – Falling Wedge Pattern
Happy Trading!
Trades of The Day Research Team