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 | Colgate-Palmolive Co. | NYSE: CL | $69.43 | $71.30 | Downtrend Channel |
| 2 | Tesla Inc. | NASDAQ: TSLA | $260.53 | $266.00 | Symmetrical Triangle Pattern |
| 3 | Microsoft Corporation | NASDAQ: MSFT | $327.26 | $331.70 | Flag Pattern |
| 4 | Engagesmart Inc. | NYSE: ESMT | $20.80 | $21.00 | Symmetrical Triangle Pattern Breakout |
| 5 | Taiwan Semiconductor Manufacturing ADR | NYSE: TSM | $89.29 | $90.20 | Downtrend Channel Breakout |
| 6 | Cinemark Holdings Inc | NYSE: CNK | $19.66 | $19.80 | Ascending Triangle Pattern Breakout |
| 7 | Cleveland-Cliffs Inc. | NYSE: CLF | $15.50 | $16.00 | Falling Wedge Pattern |
| 8 | Pinterest Inc. | NYSE: PINS | $28.08 | $28.60 | Symmetrical Triangle Pattern Breakout |
| 9 | CoreCivic Inc | NYSE: CXW | $11.23 | $11.60 | Ascending Triangle Pattern |
| 10 | NuScale Power Corporation | NYSE: SMR | $5.75 | $6.00 | Downtrend 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 Colgate-Palmolive Co. (NYSE: CL)
Sector: Consumer Defensive | Household & Personal Products
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 CL is if the stock breaks out of the downtrend channel and has a daily close above $71.30. This is marked in the chart below as a green color dotted line.
Daily chart – CL
CL – Downtrend Channel
#2 Tesla Inc. (NASDAQ: TSLA)
Sector: Consumer Cyclical | Auto Manufacturers
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 TSLA is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $266.00. This is marked in the chart below as a green color dotted line.
Daily chart – TSLA
TSLA – Symmetrical Triangle Pattern
#3 Microsoft Corporation (NASDAQ: MSFT)
Sector: Technology | Software – Infrastructure
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 MSFT is if the stock breaks out of the flag pattern, at around $331.70. This is marked in the chart below as a green color dotted line.
Daily chart – MSFT
MSFT – Flag Pattern
#4 Engagesmart Inc. (NYSE: ESMT)
Sector: Technology | Software – Infrastructure
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 ESMT is if the stock closes above the immediate resistance level of $21.00. This is marked in the chart below as a green color dotted line.
Daily chart – ESMT
ESMT – Symmetrical Triangle Pattern Breakout
#5 Taiwan Semiconductor Manufacturing ADR (NYSE: TSM)
Sector: Technology | Semiconductors
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 TSM is if the stock has a daily close above $90.20. This is marked in the chart below as a green color dotted line.
Daily chart – TSM
TSM – Downtrend Channel Breakout
#6 Cinemark Holdings Inc. (NYSE: CNK)
Sector: Communication Services | Entertainment
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 CNK is if the stock has a daily close above the near-term resistance level of $19.80. This is marked in the chart below as a green color dotted line.
Daily chart – CNK
CNK – Ascending Triangle Pattern Breakout
#7 Cleveland-Cliffs Inc. (NYSE: CLF)
Sector: Financial | Mortgage Finance
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 CLF is if the stock breaks out of the falling wedge pattern, at a price of around $16.00. This is marked in the chart below as a green color dotted line.
Daily chart – CLF
CLF – Falling Wedge Pattern
#8 Pinterest Inc. (NYSE: PINS)
Sector: Communication Services | Internet Content & Information
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 PINS is if the stock closes above the immediate resistance level of $28.60. This is marked in the chart below as a green color dotted line.
Daily chart – PINS
PINS – Symmetrical Triangle Pattern Breakout
#9 CoreCivic Inc . (NYSE: CXW)
Sector: Industrials | Security & Protection Services
Reason: Formation of 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): The ideal buy level for CXW is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $11.60. This is marked in the chart below as a green color dotted line.
Daily chart – CXW
CXW – Ascending Triangle Pattern
#10 NuScale Power Corporation (NYSE: SMR)
Sector: Industrials | Specialty Industrial Machinery
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 SMR is if the stock breaks out of the downtrend channel and has a daily close above $6.00. This is marked in the chart below as a green color dotted line.
Daily chart – SMR
SMR – Downtrend Channel
Happy Trading!
Trades of The Day Research Team
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