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 | Snap Inc. | NYSE: SNAP | $61.30 | $66.20 | Inverted Head and Shoulders Pattern |
| 2 | Cloudflare, Inc. | NYSE: NET | $82.72 | $87.50 | Flag Pattern Breakout |
| 3 | Maxim Integrated Products, Inc. | NASDAQ: MXIM | $96.19 | $98.00 | Ascending Triangle Pattern |
| 4 | Kimberly-Clark Corporation | NYSE: KMB | $132.11 | $144.00 | Downtrend Channel |
| 5 | American Express Company | NYSE: AXP | $144.33 | $151.30 | Ascending Triangle Pattern |
| 6 | Silicon Laboratories Inc. | NASDAQ: SLAB | $154.60 | $164.00 | Inverted Head and Shoulders Pattern Breakout |
| 7 | Skillz Inc. | NYSE: SKLZ | $18.17 | $26.00 | Downtrend Channel |
| 8 | Invesco KBW Bank ETF | NASDAQ: KBWB | $63.34 | $65.80 | Flag Pattern |
| 9 | BJ’s Restaurants, Inc. | NASDAQ: BJRI | $57.00 | $62.20 | Consolidation Area |
| 10 | FactSet Research Systems Inc. | NYSE: FDS | $347.10 | $360.00 | Flag 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 Snap Inc. (NYSE: SNAP)
Sector: Communication Services | Internet Content & Information
Reason: Formation of an Inverted Head and Shoulders (IH&S) Pattern
An inverse head and shoulders pattern signifies the reversal of a downward trend. The pattern is formed when the price falls to a trough and then rises; then falls below the former trough and then rises again; and finally, the price falls again but not as far as the second trough and then rises again. The neckline of this pattern would be the resistance found near the top of the previous troughs. Once a breakout from this pattern occurs, it signifies a bullish trend.
Buy Level(s): The ideal buy level for SNAP is if the stock has a daily close above the breakout level of the IH&S pattern, at around $66.20. This is marked in the chart below as a green color dotted line.
Daily chart – SNAP
SNAP – Inverted Head and Shoulders Pattern
#2 Cloudflare, Inc. (NYSE: NET)
Sector: Technology | Software – Infrastructure
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 NET is above the near-term resistance level of $87.50. This is marked in the chart below as a green color dotted line.
Daily chart – NET
NET – Flag Pattern Breakout
#3 Maxim Integrated Products, Inc. (NASDAQ: MXIM)
Sector: Technology | Semiconductors
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 MXIM is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $98.00. This is marked in the chart below as a green color dotted line.
Daily chart – MXIM
MXIM – Ascending Triangle Pattern
#4 Kimberly-Clark Corporation (NYSE: KMB)
Sector: Consumer Defensive | Household & Personal Products
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 ideal buy level for KMB is if the stock has a daily close above the breakout level of the downtrend channel and closes above the near-term resistance level of $144.00. This is marked in the chart below as a green color dotted line.
Daily chart – KMB
KMB – Downtrend Channel
#5 American Express Company (NYSE: AXP)
Sector: Financial | Credit Services
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 AXP is if the stock has a daily close above the breakout level of the ascending triangle pattern, at around $151.30. This is marked in the chart below as a green color dotted line.
Daily chart – AXP
AXP – Ascending Triangle Pattern
#6 Silicon Laboratories Inc. (NASDAQ: SLAB)
Sector: Technology | Semiconductors
Reason: Breakout From an Inverted Head and Shoulders (IH&S) Pattern
An inverse head and shoulders pattern signifies the reversal of a downward trend. The pattern is formed when the price falls to a trough and then rises; then falls below the former trough and then rises again; and finally, the price falls again but not as far as the second trough and then rises again. The neckline of this pattern would be the resistance found near the top of the previous troughs. Once a breakout from this pattern occurs, it signifies a bullish trend.
Buy Level(s): Although the stock has broken out of an IH&S pattern, the ideal buy level for SLAB is if the stock has a daily close above the resistance level of $164.00. This is marked in the chart below as a green color dotted line.
Daily chart – SLAB
SLAB – Inverted Head and Shoulders Pattern Breakout
#7 Skillz Inc. (NYSE: SKLZ)
Sector: Communication Services | Electronic Gaming & Multimedia
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 ideal buy level for SKLZ is if the stock has a daily close above the breakout level of the downtrend channel and closes above the moving average, at around $26.00. This is marked in the chart below as a green color dotted line.
Daily chart – SKLZ
SKLZ – Downtrend Channel
#8 Invesco KBW Bank ETF (NASDAQ: KBWB)
Sector: Financial | Exchange Traded Fund
Reason: Formation of 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): The ideal buy level for KBWB is if the stock has a daily close above the breakout level of the flag pattern, at around $65.80. This is marked in the chart below as a green color dotted line.
Daily chart – KBWB
KBWB – Flag Pattern
#9 BJ’s Restaurants, Inc. (NASDAQ: BJRI)
Sector: Consumer Cyclical | Restaurants
Reason: Formation of a Consolidation Area
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 BJRI is if the stock has a daily close above the breakout level of the consolidation area, at around $62.20. This is marked in the chart below as a green color dotted line.
Daily chart – BJRI
BJRI – Consolidation Area
#10 FactSet Research Systems Inc. (NYSE: FDS)
Sector: Financial | Financial Data & Stock Exchanges
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 FDS is above the near-term resistance level of $360.00. This is marked in the chart below as a green color dotted line.
Daily chart – FDS
FDS – Flag Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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