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 | HP Inc. | NYSE: HPQ | $28.28 | $30.00 | Falling Wedge Pattern Breakout |
| 2 | XPeng Inc. | NYSE: XPEV | $42.79 | $45.50 | Symmetrical Triangle Pattern Breakout |
| 3 | Li Auto Inc. | NASDAQ: LI | $30.64 | $34.00 | Downtrend Channel Pattern |
| 4 | Sunnova Energy International Inc. | NYSE: NOVA | $38.10 | $40.80 | Symmetrical Triangle Pattern Breakout |
| 5 | 23andMe Holding Co. | NASDAQ: ME | $9.21 | $9.90 | Consolidation Area |
| 6 | PG&E Corporation | NYSE: PCG | $11.20 | $12.00 | Symmetrical Triangle Pattern Breakout |
| 7 | Marsh & McLennan Companies, Inc. | NYSE: MMC | $162.00 | $162.00 | Flag Pattern Breakout |
| 8 | Aflac Incorporated | NYSE: AFL | $55.55 | $57.50 | Double Bottom Pattern |
| 9 | Cognizant Technology Solutions Corporation | NASDAQ: CTSH | $78.83 | $79.30 | Symmetrical Triangle Pattern Breakout |
| 10 | Wells Fargo & Company | NYSE: WFC | $48.38 | $51.50 | 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 HP Inc. (NYSE: HPQ)
Sector: Technology | Computer Hardware
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 HPQ is above the nearest resistance level of $30.00. This is marked in the chart below as a green color dotted line.
Daily chart – HPQ
HPQ – Falling Wedge Pattern Breakout
#2 XPeng Inc. (NYSE: XPEV)
Sector: Consumer Cyclical | Auto Manufacturers
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 XPEV is if the stock closes above the immediate resistance level of $45.50. This is marked in the chart below as a green color dotted line.
Daily chart – XPEV
XPEV – Symmetrical Triangle Pattern Breakout
#3 Li Auto Inc. (NASDAQ: LI)
Sector: Consumer Cyclical | Auto Manufacturers
Reason: Downtrend Channel Pattern
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 LI is if the stock breaks out of the downtrend channel and closes above the price of $34.00. This is marked in the chart below as a green color dotted line.
Daily chart – LI
LI – Downtrend Channel Pattern
#4 Sunnova Energy International Inc. (NYSE: NOVA)
Sector: Technology | Solar
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 NOVA is if the stock closes above the immediate resistance level of $40.80. This is marked in the chart below as a green color dotted line.
Daily chart – NOVA
NOVA – Symmetrical Triangle Pattern Breakout
#5 23andMe Holding Co. (NASDAQ: ME)
Sector: Healthcare | Diagnostics & Research
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 ME is if the stock has a daily close above the breakout level of the consolidation area, at around $9.90. This is marked in the chart below as a green color dotted line.
Daily chart – ME
ME – Consolidation Area
#6 PG&E Corporation (NYSE: PCG)
Sector: Utilities | Utilities – Regulated Electric
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 PCG is if the stock closes above the immediate resistance level of $12.00. This is marked in the chart below as a green color dotted line.
Daily chart – PCG
PCG – Symmetrical Triangle Pattern Breakout
#7 Marsh & McLennan Companies, Inc. (NYSE: MMC)
Sector: Financial | Insurance Brokers
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 MMC is above the near-term resistance level of $162.00. This is marked in the chart below as a green color dotted line.
Daily chart – MMC
MMC – Flag Pattern Breakout
#8 Aflac Incorporated (NYSE: AFL)
Sector: Financial | Insurance – Life
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 Level(s): The ideal buy level for AFL is if the stock has a daily close above the breakout level of the double bottom pattern, at around $57.50. This is marked in the chart below as a green color dotted line.
Daily chart – AFL
AFL – Double Bottom Pattern
#9 Cognizant Technology Solutions Corporation (NASDAQ: CTSH)
Sector: Technology | Information Technology Services
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 CTSH is if the stock closes above the immediate resistance level of $79.30. This is marked in the chart below as a green color dotted line.
Daily chart – CTSH
CTSH – Symmetrical Triangle Pattern Breakout
#10 Wells Fargo & Company (NYSE: WFC)
Sector: Financial | Banks – Diversified
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 WFC is above the near-term resistance level of $51.50. This is marked in the chart below as a green color dotted line.
Daily chart – WFC
WFC – Flag Pattern Breakout
Happy Trading!
— Trades of The Day Research Team
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