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 | Lululemon Athletica Inc. | NASDAQ: LULU | $404.19 | $406.70 | Ascending Triangle Pattern Breakout |
| 2 | Elastic N.V. | NYSE: ESTC | $74.27 | $76.00 | Symmetrical Triangle Pattern Breakout |
| 3 | Diamondback Energy, Inc. | NASDAQ: FANG | $154.66 | $155.40 | Breakout From Consolidation Area |
| 4 | Seagate Technology Holdings plc | NASDAQ: STX | $73.70 | $74.40 | Symmetrical Triangle Pattern Breakout |
| 5 | UGI Corporation | NYSE: UGI | $25.27 | $26.10 | Downtrend Channel Breakout |
| 6 | CrowdStrike Holdings, Inc. | NASDAQ: CRWD | $161.23 | $164.70 | Symmetrical Triangle Pattern |
| 7 | Vale S.A. | NYSE: VALE | $13.99 | $14.50 | Falling Wedge Pattern |
| 8 | Devon Energy Corporation | NYSE: DVN | $52.92 | $54.00 | Symmetrical Triangle Pattern Breakout |
| 9 | LyondellBasell Industries N.V. | NYSE: LYB | $100.97 | $101.30 | Ascending Triangle Pattern |
| 10 | Pioneer Natural Resources Company | NYSE: PXD | $241.66 | $242.20 | 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 Lululemon Athletica Inc. (NASDAQ: LULU)
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 LULU is if the stock has a daily close above the near-term resistance level of $406.70. This is marked in the chart below as a green color dotted line.
Daily chart – LULU
LULU – Ascending Triangle Pattern Breakout
#2 Elastic N.V. (NYSE: ESTC)
Sector: Technology | Software – Application
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 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 ESTC is if the stock closes above the immediate resistance level of $76.00. This is marked in the chart below as a green color dotted line.
Daily chart – ESTC
ESTC – Symmetrical Triangle Pattern Breakout
#3 Diamondback Energy, Inc. (NASDAQ: FANG)
Sector: Energy | Oil & Gas E&P
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 FANG is above the near-term resistance area, which translates to a price of around $155.40. This is marked in the chart below as a green color dotted line.
Daily chart – FANG
FANG – Breakout From Consolidation Area
#4 Seagate Technology Holdings plc (NASDAQ: STX)
Sector: Technology | Computer Hardware
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 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 STX is if the stock closes above the immediate resistance level of $74.40. This is marked in the chart below as a green color dotted line.
Daily chart – STX
STX – Symmetrical Triangle Pattern Breakout
#5 UGI Corporation (NYSE: UGI)
Sector: Utilities | Utilities – Regulated Gas
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 UGI is if the stock has a daily close above $26.10. This is marked in the chart below as a green color dotted line.
Daily chart – UGI
UGI – Downtrend Channel Breakout
#6 CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
Sector: Technology | Software – Infrastructure
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 CRWD is if the stock has a daily close above the breakout level of the symmetrical triangle pattern, at around $164.70. This is marked in the chart below as a green color dotted line.
Daily chart – CRWD
CRWD – Symmetrical Triangle Pattern
#7 Vale S.A. (NYSE: VALE)
Sector: Basic Materials | Other Industrial Metals & Mining
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 VALE is if the stock breaks out of the falling wedge pattern, at a price of around $14.50. This is marked in the chart below as a green color dotted line.
Daily chart – VALE
VALE – Falling Wedge Pattern
#8 Devon Energy Corporation (NYSE: DVN)
Sector: Energy | Oil & Gas E&P
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 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 DVN is if the stock closes above the immediate resistance level of $54.00. This is marked in the chart below as a green color dotted line.
Daily chart – DVN
DVN – Symmetrical Triangle Pattern Breakout
#9 LyondellBasell Industries N.V. (NYSE: LYB)
Sector: Basic Materials | Specialty Chemicals
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 LYB is if the stock breaks out of the ascending triangle pattern and has a daily close above the near-term resistance level of $101.30. This is marked in the chart below as a green color dotted line.
Daily chart – LYB
LYB – Ascending Triangle Pattern
#10 Pioneer Natural Resources Company (NYSE: PXD)
Sector: Energy | Oil & Gas E&P
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 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 PXD is if the stock closes above the immediate resistance level of $242.20. This is marked in the chart below as a green color dotted line.
Daily chart – PXD
PXD – Symmetrical Triangle Pattern Breakout
Happy Trading!
Trades of The Day Research Team
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Source: Trades of the Day