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 | Sea Limited | NYSE: SE | $60.12 | $62.50 | Symmetrical Triangle Pattern |
| 2 | Vertex Energy, Inc. | NASDAQ: VTNR | $6.90 | $7.50 | Falling Wedge Pattern Breakout |
| 3 | Guess’, Inc. | NYSE: GES | $22.64 | $22.80 | Ascending Triangle Pattern Breakout |
| 4 | I-Mab | NASDAQ: IMAB | $7.39 | $7.60 | Falling Wedge Pattern Breakout |
| 5 | QuantumScape Corporation | NYSE: QS | $8.30 | $8.40 | Falling Wedge Pattern Breakout |
| 6 | Sabre Corporation | NASDAQ: SABR | $6.79 | $7.00 | Symmetrical Triangle Pattern |
| 7 | Relay Therapeutics, Inc. | NASDAQ: RLAY | $20.77 | $21.00 | Falling Wedge Pattern Breakout |
| 8 | Coinbase Global, Inc. | NASDAQ: COIN | $49.98 | $51.50 | Downtrend Channel |
| 9 | Zscaler, Inc. | NASDAQ: ZS | $107.30 | $114.10 | Falling Wedge Pattern |
| 10 | TransUnion | NYSE: TRU | $68.65 | $70.00 | Downtrend Channel 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 Sea Limited (NYSE: SE)
Sector: Communication Services | Electronic Gaming & Multimedia
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 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 SE is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $62.50. This is marked in the chart below as a green color dotted line.
Daily chart – SE
SE – Symmetrical Triangle Pattern
#2 Vertex Energy, Inc. (NASDAQ: VTNR)
Sector: Energy | Oil & Gas Refining & Marketing
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 VTNR is above the nearest resistance level of $7.50. This is marked in the chart below as a green color dotted line.
Daily chart – VTNR
VTNR – Falling Wedge Pattern Breakout
#3 Guess’, Inc. (NYSE: GES)
Sector: Consumer Cyclical | Apparel Retail
Reason: Breakout From 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): Although the stock has broken out of the ascending triangle pattern, the ideal buy level for GES is if the stock has a daily close above the near-term resistance level of $22.80. This is marked in the chart below as a green color dotted line.
Daily chart – GES
GES – Ascending Triangle Pattern Breakout
#4 I-Mab (NASDAQ: IMAB)
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 IMAB is above the nearest resistance level of $7.60. This is marked in the chart below as a green color dotted line.
Daily chart – IMAB
IMAB – Falling Wedge Pattern Breakout
#5 QuantumScape Corporation (NYSE: QS)
Sector: Consumer Cyclical | Auto Parts
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 QS is above the nearest resistance level of $8.40. This is marked in the chart below as a green color dotted line.
Daily chart – QS
QS – Falling Wedge Pattern Breakout
#6 Sabre Corporation (NASDAQ: SABR)
Sector: Technology | Information Technology Services
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 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 SABR is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $7.00. This is marked in the chart below as a green color dotted line.
Daily chart – SABR
SABR – Symmetrical Triangle Pattern
#7 Relay Therapeutics, Inc. (NASDAQ: RLAY)
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 RLAY is above the nearest resistance level of $21.00. This is marked in the chart below as a green color dotted line.
Daily chart – RLAY
RLAY – Falling Wedge Pattern Breakout
#8 Coinbase Global, Inc. (NASDAQ: COIN)
Sector: Technology | Software – Application
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 COIN is if the stock breaks out of the downtrend channel and closes above the price of $51.50. This is marked in the chart below as a green color dotted line.
Daily chart – COIN
COIN – Downtrend Channel
#9 Zscaler, Inc. (NASDAQ: ZS)
Sector: Technology | Software – Infrastructure
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 ZS is if the stock breaks out of the falling wedge pattern, at a price of around $114.10. This is marked in the chart below as a green color dotted line.
Daily chart – ZS
ZS – Falling Wedge Pattern
#10 TransUnion (NYSE: TRU)
Sector: Industrials | Consulting Services
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 TRU is if the stock has a daily close above $70.00. This is marked in the chart below as a green color dotted line.
Daily chart – TRU
TRU – Downtrend Channel Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day