The Top 10 Stocks to Watch This Week for Possible Breakouts

Last week we noted that every name on the watchlist had already broken out of its primary pattern. This week is the mirror image.

Seven of the 10 names on this week’s table are still inside their patterns. They haven’t broken out yet. The setups are formed, the trigger levels are visible, but the trigger itself hasn’t fired.

That changes the kind of trade in front of us. Last week was about confirmation — waiting for buyers to defend breakouts already in progress. This week is about anticipation — waiting for the breakout itself. Daily closes above the buy levels in the table aren’t the second test, they’re the first.

The remaining three — Dexcom, SolarEdge, and ServiceNow — have already broken out and are sitting at the secondary trigger above resistance. Different trade, same discipline: wait for the daily close.

Both flavors are on the menu this week. Pick the ones that fit the way you trade.

Here are the 10 stocks we’re watching this week, in no particular order.

If needed, swipe or scroll sideways to view the full table.

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 Sweetgreen Inc. (NYSE: SG)

Sector: Consumer Cyclical • Restaurants

Reason: Formation of 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): The ideal buy level for SG is above the breakout level of the consolidation area, at around $8.50. This is marked in the chart below as a green color dotted line.

Daily chart – SG

#2 Atour Lifestyle Holdings Ltd ADR (NASDAQ: ATAT)

Sector: Consumer Cyclical • Lodging

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 ATAT is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $39.30. This is marked in the chart below as a green color dotted line.

Daily chart – ATAT

#3 Dexcom Inc. (NASDAQ: DXCM)

Sector: Healthcare • Medical Devices

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 DXCM is above the nearest resistance level of $62.30. This is marked in the chart below as a green color dotted line.

Daily chart – DXCM

#4 Solaredge Technologies Inc. (NASDAQ: SEDG)

Sector: Technology • Solar

Reason: Breakout From an Uptrend Channel

An uptrend channel or an ascending channel is the price action contained between upward sloping parallel lines. It is formed by a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs. A stock usually trades between the two rails of the uptrend channel before finally breaking out from the upper rail.

Buy Level(s): The stock has currently broken out of the uptrend channel. However, the ideal buy level for SEDG is if the stock has a daily close above the near-term resistance level of $62.10. This is marked in the chart below as a green color dotted line.

Daily chart – SEDG

#5 Microsoft Corp. (NASDAQ: MSFT)

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 MSFT is if the stock breaks out of the downtrend channel and has a daily close above $433.00. This is marked in the chart below as a green color dotted line.

Daily chart – MSFT

#6 AST SpaceMobile Inc. (NASDAQ: ASTS)

Sector: Technology • Communication Equipment

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 ASTS is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $87.50. This is marked in the chart below as a green color dotted line.

Daily chart – ASTS

#7 ServiceNow Inc. (NYSE: NOW)

Sector: Technology • Software – Application

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 NOW is above the nearest resistance level of $100.60. This is marked in the chart below as a green color dotted line.

Daily chart – NOW

#8 Shoals Technologies Group Inc. (NASDAQ: SHLS)

Sector: Technology • Solar

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 SHLS is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $11.20. This is marked in the chart below as a green color dotted line.

Daily chart – SHLS

#9 Globant SA (NYSE: GLOB)

Sector: Technology • Information Technology 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 GLOB is if the stock breaks out of the falling wedge pattern, at a price of around $41.50. This is marked in the chart below as a green color dotted line.

Daily chart – GLOB

#10 Illumina Inc. (NASDAQ: ILMN)

Sector: Healthcare • Diagnostics & Research

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 ILMN is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $148.00. This is marked in the chart below as a green color dotted line.

Daily chart – ILMN

Ten names, two timing scenarios. Seven anticipation setups — Sweetgreen, Atour, Microsoft, AST SpaceMobile, Shoals, Globant, and Illumina — where the pattern is built but the breakout hasn’t fired. And three confirmation setups — Dexcom, SolarEdge, and ServiceNow — where the breakout has fired and the question is whether buyers defend it.

The signal that matters in both cases is the same: a clean daily close above the buy level listed alongside each ticker. Not the open. Not the intraday high. The close. Anything less, we wait.

We’ll watch the table this week and let the names sort themselves out.

Happy Trading!
Tara and Greg