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 | Western Digital Corporation | NASDAQ: WDC | $45.85 | $47.50 | Ascending Triangle Pattern |
| 2 | Overstock.com, Inc. | NASDAQ: OSTK | $69.33 | $70.00 | Falling Wedge Pattern Breakout |
| 3 | AstraZeneca PLC | NASDAQ: AZN | $52.61 | $55.50 | Bounce-back from trendline support |
| 4 | The Unilever Group | NYSE: UL | $60.51 | $64.00 | Ascending Triangle Pattern |
| 5 | 21Vianet Group, Inc. | NASDAQ: VNET | $29.99 | $30.40 | Ascending Triangle Pattern Breakout |
| 6 | Cronos Group Inc. | NASDAQ: CRON | $8.47 | $9.00 | Cup and Handle Pattern |
| 7 | Lithium Americas Corp. | NYSE: LAC | $11.52 | $12.50 | Symmetrical Triangle Pattern Breakout |
| 8 | Tempur Sealy International, Inc. | NYSE: TPX | $25.56 | $26.00 | Ascending Triangle Pattern |
| 9 | Liberty Media Formula One Series C | NASDAQ: FWONK | $42.59 | $48.00 | Ascending Triangle Pattern |
| 10 | Daqo New Energy Corp. | NYSE: DQ | $45.26 | $48.50 | Ascending Triangle Pattern |
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 Western Digital Corporation (NASDAQ: WDC)
Sector: Technology | Computer Hardware
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 WDC is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $47.50. This is marked in the chart below as a green color dotted line.
Daily chart – WDC
Daily Chart – WDC – Ascending Triangle Pattern
#2 Overstock.com, Inc. (NASDAQ: OSTK)
Sector: Consumer Cyclical | Internet Retail
Reason: Breakout from 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): Although the stock has broken out of the falling wedge pattern, the ideal buy level for OSTK is if the stock close above the immediate resistance level of the 50-day SMA. This translates to a price of around $70.00. This is marked in the chart below as a green color dotted line.
Daily chart – OSTK
Daily Chart – OSTK – Falling Wedge Pattern
#3 AstraZeneca PLC (NASDAQ: AZN)
Sector: Healthcare | Drug Manufacturers – General
Reason: Bounceback from the trendline support
A trendline is formed when a stock’s price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. Trendlines act as key support and resistance levels and increase the chance for the price to bounce back off them.
When the price drops to the trend line and rebounds from it during an uptrend, it usually signifies the continuation of the prevailing trend.
Buy Level(s): Although the stock has bounced higher from the trendline support, the ideal buy level for AZN is above the near-term resistance area. This translates to a price of around $55.50. This is marked in the chart below as a green color dotted line.
Daily chart – AZN
Daily Chart – AZN – Bounceback from Trendline Support
#4 The Unilever Group (NYSE: UL)
Sector: Consumer Defensive | Household & Personal Products
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 UL is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $64.00. This is marked in the chart below as a green color dotted line.
Daily chart – UL
Daily Chart – UL – Ascending Triangle Pattern
#5 21Vianet Group, Inc. (NASDAQ: VNET)
Sector: Technology | Information Technology Services
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 had recently broken out of an ascending triangle pattern, a doji was formed last day (marked as a pink color ellipse). Therefore, the ideal buy level for VNET is above the close of doji, at a price of around $30.40. This is marked in the chart below as a green color dotted line.
Daily chart – VNET
Daily Chart – VNET – Ascending Triangle Pattern Breakout
#6 Cronos Group Inc. (NASDAQ: CRON)
Sector: Healthcare | Drug Manufacturers – Specialty & Generic
Reason: Formation of a Cup and Handle Pattern in Weekly Chart
A Cup with Handle is a bullish continuation pattern that marks a consolidation period followed by a breakout. A Cup and Handle pattern is formed when the price initially declines, then levels off, and begins to rise again, forming a rounded cup-like structure. The handle is then formed near the rim or lip of the cup, either sideways or declining price channel. A breakout from a cup and handle pattern is a strong bullish indication as it signifies the start of a new bullish trend.
Buy Level(s): The ideal buy level for CRON is if the stock has a daily close above the breakout level of the cup and handle pattern, at around $9.00. This is marked in the chart below as a green color dotted line.
Daily chart – CRON
Daily Chart – CRON – Cup and Handle Pattern
#7 Lithium Americas Corp. (NYSE: LAC)
Sector: Basic Materials | Other Industrial Metals & Mining
Reason: Breakout from 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 an 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): Although the stock had recently broken out of a symmetrical triangle pattern, the ideal buy level for LAC is above the resistance level of around $12.50. This is marked in the chart below as a green color dotted line.
Daily chart – LAC
Daily Chart – LAC – Symmetrical Triangle Pattern Breakout
#8 Tempur Sealy International, Inc. (NYSE: TPX)
Sector: Consumer Cyclical | Furnishings, Fixtures & Appliances
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 TPX is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – TPX
Daily Chart – TPX – Ascending Triangle Pattern
#9 Liberty Media Formula One Series C (NASDAQ: FWONK)
Sector: Communication Services | Broadcasting
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 FWONK is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $48.00. This is marked in the chart below as a green color dotted line.
Daily chart – FWONK
Daily Chart – FWONK – Ascending Triangle Pattern
#10 Daqo New Energy Corp. (NYSE: DQ)
Sector: Technology | Semiconductor Equipment & Materials
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 DQ is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $48.50. This is marked in the chart below as a green color dotted line.
Daily chart – DQ
Daily Chart – DQ – Ascending Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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