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 | Cal-Maine Foods, Inc. | NASDAQ: CALM | $37.54 | $38.50 | Falling Wedge Pattern |
| 2 | Newtek Business Services Corp. | NASDAQ: NEWT | $19.69 | $20.60 | Trend Channel |
| 3 | Viasat, Inc. | NASDAQ: VSAT | $32.65 | $37.70 | Falling Wedge Pattern |
| 4 | Netflix, Inc. | NASDAQ: NFLX | $540.73 | $558.00 | Trend Channel |
| 5 | Cisco Systems, Inc. | NASDAQ: CSCO | $44.75 | $48.50 | Double Bottom Pattern |
| 6 | Eiger BioPharmaceuticals, Inc. | NASDAQ: EIGR | $12.29 | $13.60 | Symmetrical Triangle Pattern Breakout |
| 7 | Crinetics Pharmaceuticals, Inc. | NASDAQ: CRNX | $14.11 | $16.00 | Falling Wedge Pattern Breakout |
| 8 | Vornado Realty Trust | NYSE: VNO | $37.34 | $46.00 | Consolidation Area |
| 9 | DuPont de Nemours, Inc. | NYSE: DD | $71.11 | $73.00 | Uptrend Channel |
| 10 | Bristol-Myers Squibb Company | NYSE: BMY | $62.03 | $66.00 | 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 Cal-Maine Foods, Inc. (NASDAQ: CALM)
Sector: Consumer Defensive | Farm Products
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 CALM is if the stock breaks out of the falling wedge pattern as well as close above the immediate resistance level of $38.50. This is marked in the chart below as a green color dotted line.
Daily chart – CALM
CALM – Falling Wedge Pattern
#2 Newtek Business Services Corp. (NASDAQ: NEWT)
Sector: Financial | Asset Management
Reason: Formation of a Trend Channel
A trend channel is the price action contained between 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 channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for NEWT is if the stock has a daily close above the breakout level of the trend channel, at around $20.60. This is marked in the chart below as a green color dotted line.
Daily chart – NEWT
NEWT – Channel
#3 Viasat, Inc. (NASDAQ: VSAT)
Sector: Technology | Communication Equipment
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 VSAT is if the stock breaks out of the falling wedge pattern as well as close above the 200-day SMA. This translates to a price of around $37.70. This is marked in the chart below as a green color dotted line.
Daily chart – VSAT
VSAT – Falling Wedge Pattern
#4 Netflix, Inc. (NASDAQ: NFLX)
Sector: Communication Services | Entertainment
Reason: Formation of a Trend Channel
A trend channel is the price action contained between 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 channel before finally breaking out from the upper rail.
Buy Level(s): The ideal buy level for NFLX is if the stock has a daily close above the breakout level of the trend channel, at around $558.00. This is marked in the chart below as a green color dotted line.
Daily chart – NFLX
NFLX – Channel
#5 Cisco Systems, Inc. (NASDAQ: CSCO)
Sector: Technology | Communication Equipment
Reason: Formation of a Double Bottom Pattern
A Double Bottom Pattern looks like the letter W and is characterized by two well-defined lows at approximately the same price level. This twice-touched low is usually a very strong support level. The high point between the two bottoms’ resistance level is called the neckline. Once a breakout happens from this key price level (neckline), it signifies the start of a bullish move.
Buy Leve(s): The ideal buy level for CSCO is above the neckline of the double bottom pattern, at around $48.50. This is marked in the chart below as a green color dotted line.
Daily chart – CSCO
CSCO – Double Bottom Pattern
#6 Eiger BioPharmaceuticals, Inc. (NASDAQ: EIGR)
Sector: Healthcare | Biotechnology
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 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): The stock has currently broken out of a symmetrical triangle pattern. However, the ideal buy level for EIGR is if the stock closes above the immediate resistance level of $13.60. This is marked in the chart below as a green color dotted line.
Daily chart – EIGR
EIGR – Symmetrical Triangle Pattern Breakout
#7 Crinetics Pharmaceuticals, Inc. (NASDAQ: CRNX)
Sector: Healthcare | Biotechnology
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 CRNX is above the nearest resistance level of $16.00. This is marked in the chart below as a green color dotted line.
Daily chart – CRNX
CRNX – Falling Wedge Pattern Breakout
#8 Vornado Realty Trust (NYSE: VNO)
Sector: Real Estate | REIT – Office
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 VNO is if the stock has a daily close above the breakout level of the consolidation area, at around $46.00. This is marked in the chart below as a green color dotted line.
Daily chart – VNO
VNO – Consolidation Area
#9 DuPont de Nemours, Inc. (NYSE: DD)
Sector: Basic Materials | Chemicals
Reason: Formation of 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 ideal buy level for DD is if the stock has a daily close above the breakout level of the uptrend channel, at around $73.00. This is marked in the chart below as a green color dotted line.
Daily chart – DD
DD – Uptrend Channel
#10 Bristol-Myers Squibb Company (NYSE: BMY)
Sector: Healthcare | Drug Manufacturers – General
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 BMY is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $66.00. This is marked in the chart below as a green color dotted line.
Daily chart – BMY
BMY – Ascending Triangle Pattern
Happy Trading!
Trades of The Day Research Team
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