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 | Pennymac Mortgage Investment Trust | NYSE: PMT | $12.28 | $12.40 | Downtrend Channel |
| 2 | Amazon.com Inc. | NASDAQ: AMZN | $127.74 | $129.70 | Flag Pattern |
| 3 | Deckers Outdoor Corp. | NYSE: DECK | $576.37 | $581.00 | Symmetrical Triangle Pattern Breakout |
| 4 | Sally Beauty Holdings Inc | NYSE: SBH | $8.48 | $8.60 | Falling Wedge Pattern Breakout |
| 5 | Sprott Physical Gold Trust | NYSE: PHYS | $15.54 | $15.60 | Downtrend Channel Breakout |
| 6 | Chindata Group Holdings Ltd ADR | NASDAQ: CD | $8.89 | $9.00 | Breakout From Consolidation Area |
| 7 | ArcBest Corp | NASDAQ: ARCB | $102.26 | $102.90 | Downtrend Channel Breakout |
| 8 | Newmont Corp | NYSE: NEM | $38.97 | $40.60 | Falling Wedge Pattern |
| 9 | BJ’s Restaurant Inc. | NASDAQ: BJRI | $25.61 | $25.80 | Downtrend Channel Breakout |
| 10 | Ball Corp. | NYSE: BALL | $47.06 | $48.10 | 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 Pennymac Mortgage Investment Trust (NYSE: PMT)
Sector: Real Estate • REIT – Mortgage
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 PMT is if the stock breaks out of the downtrend channel and has a daily close above $12.40. This is marked in the chart below as a green color dotted line.
Daily chart – PMT
PMT – Downtrend Channel
#2 Amazon.com Inc. (NASDAQ: AMZN)
Sector: Consumer Cyclical • Internet Retail
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 AMZN is if the stock breaks out of the flag pattern, at around $129.70. This is marked in the chart below as a green color dotted line.
Daily chart – AMZN
AMZN – Flag Pattern
#3 Deckers Outdoor Corp. (NYSE: DECK)
Sector: Consumer Cyclical • Footwear & Accessories
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 DECK is if the stock closes above the immediate resistance level of $581.00. This is marked in the chart below as a green color dotted line.
Daily chart – DECK
DECK – Symmetrical Triangle Pattern Breakout
#4 Sally Beauty Holdings Inc. (NYSE: SBH)
Sector: Consumer Cyclical • Specialty Retail
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 SBH is above the nearest resistance level of $8.60. This is marked in the chart below as a green color dotted line.
Daily chart – SBH
SBH – Falling Wedge Pattern Breakout
#5 Sprott Physical Gold Trust (NYSE: PHYS)
Sector: Financial • Asset Management
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 PHYS is if the stock has a daily close above $15.60. This is marked in the chart below as a green color dotted line.
Daily chart – PHYS
PHYS – Downtrend Channel Breakout
#6 Chindata Group Holdings Ltd ADR (NASDAQ: CD)
Sector: Technology • Information Technology 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 CD is above the near-term resistance area, which translates to a price of around $9.00. This is marked in the chart below as a green color dotted line.
Daily chart – CD
CD – Breakout From Consolidation Area
#7 ArcBest Corp (NASDAQ: ARCB)
Sector: Industrials • Trucking
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 ARCB is if the stock has a daily close above $102.90. This is marked in the chart below as a green color dotted line.
Daily chart – ARCB
ARCB – Downtrend Channel Breakout
#8 Newmont Corp (NYSE: NEM)
Sector: Basic Materials • Gold
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 NEM is if the stock breaks out of the falling wedge pattern, at a price of around $40.60. This is marked in the chart below as a green color dotted line.
Daily chart – NEM
NEM – Falling Wedge Pattern
#9 BJ’s Restaurant Inc. (NASDAQ: BJRI)
Sector: Consumer Cyclical • Restaurants
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 BJRI is if the stock has a daily close above $25.80. This is marked in the chart below as a green color dotted line.
Daily chart – BJRI
BJRI – Downtrend Channel Breakout
#10 Ball Corp. (NYSE: BALL)
Sector: Consumer Cyclical • Packaging & Containers
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 BALL is if the stock has a daily close above $48.10. This is marked in the chart below as a green color dotted line.
Daily chart – BALL
BALL – Downtrend Channel Breakout
Happy Trading!
Trades of The Day Research Team
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