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 | Hillenbrand Inc. | NYSE: HI | $44.42 | $44.60 | Falling Wedge Pattern Breakout |
| 2 | American Axle & Manufacturing Holdings Inc | NYSE: AXL | $8.82 | $9.20 | Symmetrical Triangle Pattern Breakout |
| 3 | Suburban Propane Partners LP | NYSE: SPH | $17.39 | $17.50 | Flag Pattern Breakout |
| 4 | Compass Minerals International Inc. | NYSE: CMP | $26.16 | $26.30 | Falling Wedge Pattern Breakout |
| 5 | Alkermes plc | ALKS | $27.42 | $27.80 | Downtrend Channel |
| 6 | USA Compression Partners LP | NYSE: USAC | $24.65 | $25.00 | Flag Pattern Breakout |
| 7 | Dropbox Inc. | NASDAQ: DBX | $29.62 | $29.80 | Ascending Triangle Pattern Breakout |
| 8 | OneSpan Inc. | NASDAQ: OSPN | $11.00 | $11.50 | Falling Wedge Pattern Breakout |
| 9 | Frontline Plc | NYSE: FRO | $20.09 | $20.70 | Symmetrical Triangle Pattern |
| 10 | Radware | NASDAQ: RDWR | $16.90 | $17.30 | 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 Hillenbrand Inc. (NYSE: HI)
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 HI is above the nearest resistance level of $44.60. This is marked in the chart below as a green color dotted line.
Daily chart – HI
HI – Falling Wedge Pattern Breakout
#2 American Axle & Manufacturing Holdings Inc. (NYSE: AXL)
Sector: Consumer Cyclical • Auto Parts
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 AXL is if the stock closes above the immediate resistance level of $9.20. This is marked in the chart below as a green color dotted line.
Daily chart – AXL
AXL – Symmetrical Triangle Pattern Breakout
#3 Suburban Propane Partners LP (NYSE: SPH)
Sector: Utilities • Utilities – Regulated Gas
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 SPH is above the near-term resistance level of $17.50. This is marked in the chart below as a green color dotted line.
Daily chart – SPH
SPH – Flag Pattern Breakout
#4 Compass Minerals International Inc. (NYSE: CMP)
Sector: Basic Materials • Other Industrial Metals & Mining
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 CMP is above the nearest resistance level of $26.30. This is marked in the chart below as a green color dotted line.
Daily chart – CMP
CMP – Falling Wedge Pattern Breakout
#5 Alkermes plc (NASDAQ: ALKS)
Sector: Healthcare • Drug Manufacturers – Specialty & Generic
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 ALKS is if the stock breaks out of the downtrend channel and has a daily close above $27.80. This is marked in the chart below as a green color dotted line.
Daily chart – ALKS
ALKS – Downtrend Channel
#6 USA Compression Partners LP (NYSE: USAC)
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 USAC is above the near-term resistance level of $25.00. This is marked in the chart below as a green color dotted line.
Daily chart – USAC
USAC – Flag Pattern Breakout
#7 Dropbox Inc. (NASDAQ: DBX)
Sector: Technology • Software – Infrastructure
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 DBX is if the stock has a daily close above the near-term resistance level of $29.80. This is marked in the chart below as a green color dotted line.
Daily chart – DBX
DBX – Ascending Triangle Pattern Breakout
#8 OneSpan Inc. (NASDAQ: OSPN)
Sector: Technology • Software – Infrastructure
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 OSPN is above the nearest resistance level of $11.50. This is marked in the chart below as a green color dotted line.
Daily chart – OSPN
OSPN – Falling Wedge Pattern Breakout
#9 Frontline Plc (NYSE: FRO)
Sector: Energy • Oil & Gas Midstream
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 FRO is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $20.70. This is marked in the chart below as a green color dotted line.
Daily chart – FRO
FRO – Symmetrical Triangle Pattern
#10 Radware (NASDAQ: RDWR)
Sector: Technology • Software – Infrastructure
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 RDWR is above the nearest resistance level of $17.30. This is marked in the chart below as a green color dotted line.
Daily chart – RDWR
RDWR – Falling Wedge Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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