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 | RedBall Acquisition Corp. | NYSE: RBAC | $9.87 | $10.00 | Falling Wedge Pattern Breakout |
| 2 | APA Corporation | NASDAQ: APA | $24.36 | $24.50 | Double Bottom Pattern Breakout |
| 3 | Unum Group | NYSE: UNM | $28.32 | $29.00 | Downtrend Channel Breakout |
| 4 | Tata Motors Limited | NYSE: TTM | $26.35 | $26.40 | Double Bottom Pattern Breakout |
| 5 | Pebblebrook Hotel Trust | NYSE: PEB | $22.80 | $25.00 | Flag Pattern |
| 6 | The AES Corporation | NYSE: AES | $24.07 | $25.20 | Falling Wedge Pattern |
| 7 | Marathon Digital Holdings, Inc. | NASDAQ: MARA | $39.49 | $43.50 | Symmetrical Triangle Pattern |
| 8 | Ford Motor Company | NYSE: F | $15.12 | $15.50 | Downtrend Channel Breakout |
| 9 | Yellow Corporation | NASDAQ: YELL | $7.10 | $7.20 | Breakout from Consolidation Area |
| 10 | Merck & Co., Inc. | NYSE: MRK | $80.63 | $83.50 | Symmetrical Triangle 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 RedBall Acquisition Corp. (NYSE: RBAC)
Sector: Financial | Shell Companies
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 RBAC is above the nearest resistance level of $10.00. This is marked in the chart below as a green color dotted line.
Daily chart – RBAC
RBAC – Falling Wedge Pattern Breakout
#2 APA Corporation (NASDAQ: APA)
Sector: Energy | Oil & Gas E&P
Reason: Breakout From 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): Although the stock has broken out of a double bottom pattern, the ideal buy level for APA is if the stock has a daily close above the near-term resistance level of $24.50. This is marked in the chart below as a green color dotted line.
Daily chart – APA
APA – Double Bottom Pattern Breakout
#3 Unum Group (NYSE: UNM)
Sector: Financial | Insurance – Life
Reason: Downtrend Channel Breakout
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.
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 daily chart shows that the stock has currently broken out of a downtrend channel. However, there is a near-term resistance level for the stock. Hence, the ideal buy level for UNM is if the stock has a daily close above $29.00. This is marked in the chart below as a green color dotted line.
Daily chart – UNM
UNM – Downtrend Channel Breakout
#4 Tata Motors Limited (NYSE: TTM)
Sector: Consumer Cyclical | Auto Manufacturers
Reason: Breakout From 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): Although the stock has broken out of a double bottom pattern, the ideal buy level for TTM is if the stock has a daily close above the near-term resistance level of $26.40. This is marked in the chart below as a green color dotted line.
Daily chart – TTM
TTM – Double Bottom Pattern Breakout
#5 Pebblebrook Hotel Trust (NYSE: PEB)
Sector: Real Estate | REIT – Hotel & Motel
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 PEB is if the stock breaks out of the flag pattern, at around $25.00. This is marked in the chart below as a green color dotted line.
Daily chart – PEB
PEB – Flag Pattern
#6 The AES Corporation (NYSE: AES)
Sector: Utilities | Utilities – Diversified
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 AES is if the stock breaks out of the falling wedge pattern and closes above the nearest resistance level of $25.20. This is marked in the chart below as a green color dotted line.
Daily chart – AES
AES – Falling Wedge Pattern
#7 Marathon Digital Holdings, Inc. (NASDAQ: MARA)
Sector: Financial | Capital Markets
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 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 ideal buy level for MARA is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $43.50. This is marked in the chart below as a green color dotted line.
Daily chart – MARA
MARA – Symmetrical Triangle Pattern
#8 Ford Motor Company (NYSE: F)
Sector: Consumer Cyclical | Auto Manufacturers
Reason: Breakout from 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): Although the stock has currently broken out of the downtrend channel, the ideal buy level for F is above the price of $15.50. This is marked in the chart below as a green color dotted line.
Daily chart – F
F – Downtrend Channel Breakout
#9 Yellow Corporation (NASDAQ: YELL)
Sector: Industrials | Trucking
Reason: Breakout From 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): Although the stock has currently broken out of a consolidation area, the ideal buy level for YELL is above the near-term resistance area, which translates to a price of around $7.20. This is marked in the chart below as a green color dotted line.
Daily chart – YELL
YELL -Breakout from Consolidation Area
#10 Merck & Co., Inc. (NYSE: MRK)
Sector: Healthcare | Drug Manufacturers – General
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 MRK is if the stock closes above the immediate resistance level of $83.50. This is marked in the chart below as a green color dotted line.
Daily chart – MRK
MRK – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day