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 | Automatic Data Processing Inc. | NASDAQ: ADP | $258.84 | $266.70 | Downtrend Channel |
| 2 | Aeluma Inc. | NASDAQ: ALMU | $18.08 | $18.40 | Symmetrical Triangle Pattern |
| 3 | Amdocs Ltd. | NASDAQ: DOX | $81.73 | $82.00 | Downtrend Channel |
| 4 | Vericel Corp. | NASDAQ: VCEL | $37.66 | $38.70 | Symmetrical Triangle Pattern |
| 5 | DENTSPLY Sirona Inc. | NASDAQ: XRAY | $11.52 | $11.80 | Falling Wedge Pattern |
| 6 | GSI Technology Inc. | NASDAQ: GSIT | $7.65 | $7.90 | Symmetrical Triangle Pattern Breakout |
| 7 | Coupang Inc. | NYSE: CPNG | $24.27 | $25.80 | Falling Wedge Pattern |
| 8 | Target Corp. | NYSE: TGT | $99.55 | $102.40 | Downtrend Channel |
| 9 | Avis Budget Group Inc. | NASDAQ: CAR | $131.93 | $137.40 | Falling Wedge Pattern |
| 10 | Hawaiian Electric Industries, Inc. | NYSE: HE | $12.12 | $12.20 | 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 Automatic Data Processing Inc. (NASDAQ: ADP)
Sector: Technology • Software – Application
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 ADP is if the stock breaks out of the downtrend channel and has a daily close above $266.70. This is marked in the chart below as a green color dotted line.
Daily chart – ADP
ADP – Downtrend Channel
#2 Aeluma Inc. (NASDAQ: ALMU)
Sector: Technology • Semiconductors
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 ALMU is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $18.40. This is marked in the chart below as a green color dotted line.
Daily chart – ALMU
ALMU – Symmetrical Triangle Pattern
#3 Amdocs Ltd. (NASDAQ: DOX)
Sector: Technology • Software – Infrastructure
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 DOX is if the stock breaks out of the downtrend channel and has a daily close above $82.00. This is marked in the chart below as a green color dotted line.
Daily chart – DOX
DOX – Downtrend Channel
#4 Vericel Corp. (NASDAQ: VCEL)
Sector: Healthcare • Biotechnology
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 VCEL is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $38.70. This is marked in the chart below as a green color dotted line.
Daily chart – VCEL
VCEL – Symmetrical Triangle Pattern
#5 DENTSPLY Sirona Inc. (NASDAQ: XRAY)
Sector: Healthcare • Medical Instruments & Supplies
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 XRAY is if the stock breaks out of the falling wedge pattern, at a price of around $11.80. This is marked in the chart below as a green color dotted line.
Daily chart – XRAY
XRAY – Falling Wedge Pattern
#6 GSI Technology Inc. (NASDAQ: GSIT)
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 GSIT is if the stock closes above the immediate resistance level of $7.90. This is marked in the chart below as a green color dotted line.
Daily chart – GSIT
GSIT – Symmetrical Triangle Pattern Breakout
#7 Coupang Inc. (NYSE: CPNG)
Sector: Consumer Cyclical • Internet Retail
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 CPNG is if the stock breaks out of the falling wedge pattern, at a price of around $25.80. This is marked in the chart below as a green color dotted line.
Daily chart – CPNG
CPNG – Falling Wedge Pattern
#8 Target Corp. (NYSE: TGT)
Sector: Consumer Defensive • Discount Stores
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 TGT is if the stock breaks out of the downtrend channel and has a daily close above $102.40. This is marked in the chart below as a green color dotted line.
Daily chart – TGT
TGT – Downtrend Channel
#9 Avis Budget Group Inc. (NASDAQ: CAR)
Sector: Industrials • Rental & Leasing Services
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 CAR is if the stock breaks out of the falling wedge pattern, at a price of around $137.40. This is marked in the chart below as a green color dotted line.
Daily chart – CAR
CAR – Falling Wedge Pattern
#10 Hawaiian Electric Industries, Inc. (NYSE: HE)
Sector: Utilities • Utilities – Regulated Electric
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 HE is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $12.20. This is marked in the chart below as a green color dotted line.
Daily chart – HE
HE – Symmetrical Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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