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 | Axcelis Technologies, Inc. | NASDAQ: ACLS | $56.20 | $57.20 | Falling Wedge Pattern Breakout |
| 2 | Fresh Del Monte Produce Inc. | NYSE: FDP | $30.24 | $30.50 | Flag Pattern Breakout |
| 3 | Lear Corporation | NYSE: LEA | $129.26 | $134.70 | Falling Wedge Pattern |
| 4 | Wingstop Inc. | NASDAQ: WING | $99.49 | $102.00 | Downtrend Channel Breakout |
| 5 | Allegro MicroSystems, Inc. | NASDAQ: ALGM | $21.16 | $22.30 | Falling Wedge Pattern |
| 6 | 1Life Healthcare, Inc. | NASDAQ: ONEM | $10.04 | $12.00 | Ascending Triangle Pattern |
| 7 | Bank of America Corporation | NYSE: BAC | $32.25 | $33.00 | Falling Wedge Pattern |
| 8 | JPMorgan Chase & Co. | NYSE: JPM | $112.95 | $117.80 | Downtrend Channel |
| 9 | Citigroup Inc. | NYSE: C | $49.98 | $51.00 | Falling Wedge Pattern Breakout |
| 10 | Synovus Financial Corp. | NYSE: SNV | $36.26 | $38.60 | Falling Wedge 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 Axcelis Technologies, Inc. (NASDAQ: ACLS)
Sector: Technology | Semiconductor Equipment & Materials
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 ACLS is above the nearest resistance level of $57.20. This is marked in the chart below as a green color dotted line.
Daily chart – ACLS
ACLS – Falling Wedge Pattern Breakout
#2 Fresh Del Monte Produce Inc. (NYSE: FDP)
Sector: Consumer Defensive | Farm Products
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 FDP is above the near-term resistance level of $30.50. This is marked in the chart below as a green color dotted line.
Daily chart – FDP
FDP -Flag Pattern Breakout
#3 Lear Corporation (NYSE: LEA)
Sector: Consumer Cyclical | Auto Parts
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 LEA is if the stock breaks out of the falling wedge pattern, at a price of around $134.70. This is marked in the chart below as a green color dotted line.
Daily chart – LEA
LEA -Falling Wedge Pattern
#4 Wingstop Inc. (NASDAQ: WING)
Sector: Consumer Cyclical | Restaurants
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.
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 WING is if the stock has a daily close above $102.00. This is marked in the chart below as a green color dotted line.
Daily chart – WING
WING -Downtrend Channel Breakout
#5 Allegro MicroSystems, Inc. (NASDAQ: ALGM)
Sector: Technology | Semiconductors
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 ALGM is if the stock breaks out of the falling wedge pattern, at a price of around $22.30. This is marked in the chart below as a green color dotted line.
Daily chart – ALGM
ALGM -Falling Wedge Pattern
#6 1Life Healthcare, Inc. (NASDAQ: ONEM)
Sector: Healthcare | Health Information 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 ONEM is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $12.00. This is marked in the chart below as a green color dotted line.
Daily chart – ONEM
ONEM – Ascending Triangle Pattern
#7 Bank of America Corporation (NYSE: BAC)
Sector: Financial | Banks – 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 BAC is if the stock breaks out of the falling wedge pattern, at a price of around $33.00. This is marked in the chart below as a green color dotted line.
Daily chart – BAC
BAC – Falling Wedge Pattern
#8 JPMorgan Chase & Co. (NYSE: JPM)
Sector: Financial | Banks – Diversified
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 daily chart shows that the stock is currently forming a downtrend channel. The ideal buy level for JPM is if the stock breaks out of the downtrend channel and has a daily close above $117.80. This is marked in the chart below as a green color dotted line.
Daily chart – JPM
JPM – Downtrend Channel
#9 Citigroup Inc. (NYSE: C)
Sector: Financial | Banks – Diversified
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 C is above the nearest resistance level of $51.00. This is marked in the chart below as a green color dotted line.
Daily chart – C
C -Falling Wedge Pattern Breakout
#10 Synovus Financial Corp. (NYSE: SNV)
Sector: Financial | Banks – Regional
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 SNV is if the stock breaks out of the falling wedge pattern, at a price of around $38.60. This is marked in the chart below as a green color dotted line.
Daily chart – SNV
SNV – Falling Wedge Pattern
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day