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Possibly one of the most preferred methods for those using an active investing approach, selecting breakout stocks offers the promise of substantial returns. This approach involves identifying those stocks whose prices are varying within a narrow band.
If the price of the stock falls below this channel, it could be the best time to sell of this stock. However, the best time to buy a stock as per this strategy is when it is about to break above this trading band. Such stocks offer the prospect of impressive gains.
Determining Breakout Levels
The key to this strategy is calculating the support and resistance levels of a stock. The floor of a stock’s trading channel is its support level and it should be sold as soon as it threatens to fall lower. On the other hand, the resistance is a stock's breakout level and it can gain substantially if it breaks the resistance level.
When a stock is close to its support level, demand is literally hitting the floor. On the other hand, demand rises when it is breaching its resistance level, signaling the right time to make a lucrative addition to your portfolio. The idea is to pick stocks which have just broken above their resistance barriers or are very closing to doing so.
Has a Genuine Breakout Occurred?
The primary risk associated with such a strategy is that the decision to buy an apparent breakout candidate has been incorrectly timed. When a stock moves above the resistance level, it should be a highly prized commodity for traders. However, whether such a breakout is at all genuine is another matter altogether.
For a bona fide breakout, the stock’s earlier resistance barrier should become its new support level. This only happens if the trading channel that has been established is tested by observing long-term price trends. The strength of the support and resistance levels can be ascertained only through such a study. Despite the risk of misidentification, correctly identifying such stocks can yield considerable returns, even at a price which may not seem attractive at first glance.
Screening Parameters
• Percentageprice change over four weeks between 10% and 20% (Stocks which are showing considerable price increases, but whose gains are not excessive.)
• Current Price /52-Week High greater than or equal to 0.9 (Stocks which are trading 90% close to their 52-week highs.)
• Zacks Rank less than or equal to #2 (Only Strong Buy and Buy rated stocks can get through.)
• Beta for 60 months less than or equal to 2 (Stocks which move by a greater degree than the broader market but within a reasonable limit.)
• Current price less than or equal to $20 (Stocks which are reasonably priced.)
These criteria narrow down the universe of over 7739 stocks to only 10.
Here are the top five stocks that meet these criteria:
Lattice Semiconductor Corporation (LSCC - Free Report) designs, develops and markets high performance programmable logic devices and related development system software. Lattice Semiconductor has a Zacks Rank #1 (Strong Buy) and its average EPS surprise over the last four quarters is 83.3%.
CONSOL Coal Resources LP manages and develops active thermal coal operations. CONSOL Coal Resources has a Zacks Rank #1 and its average EPS surprise over the last four quarters is 2.7%.
NOW Inc. (DNOW - Free Report) is a distributor to the energy and industrial sectors. NOW Inc. has a Zacks Rank #1 and its average EPS surprise over the last four quarters is more than 100%.
On Deck Capital, Inc. is an online platform that uses a big data, analytic model to source, underwrite, and fund loans to small businesses. On Deck Capital’s average EPS surprise over the last four quarters is 58.3%. On Deck Capital has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Partners LP (GLP - Free Report) is a distributor of gasoline, residual oil, distillates and renewable fuels to retailers and commercial customers in New England and New York. Global Partners has a Zacks Rank #2 (Buy) and its average EPS surprise over the last four quarters is 42.4%.
You can get the rest of the stocks meeting these criteria by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Terrific Breakout Stocks Offering Astounding Returns
Possibly one of the most preferred methods for those using an active investing approach, selecting breakout stocks offers the promise of substantial returns. This approach involves identifying those stocks whose prices are varying within a narrow band.
If the price of the stock falls below this channel, it could be the best time to sell of this stock. However, the best time to buy a stock as per this strategy is when it is about to break above this trading band. Such stocks offer the prospect of impressive gains.
Determining Breakout Levels
The key to this strategy is calculating the support and resistance levels of a stock. The floor of a stock’s trading channel is its support level and it should be sold as soon as it threatens to fall lower. On the other hand, the resistance is a stock's breakout level and it can gain substantially if it breaks the resistance level.
When a stock is close to its support level, demand is literally hitting the floor. On the other hand, demand rises when it is breaching its resistance level, signaling the right time to make a lucrative addition to your portfolio. The idea is to pick stocks which have just broken above their resistance barriers or are very closing to doing so.
Has a Genuine Breakout Occurred?
The primary risk associated with such a strategy is that the decision to buy an apparent breakout candidate has been incorrectly timed. When a stock moves above the resistance level, it should be a highly prized commodity for traders. However, whether such a breakout is at all genuine is another matter altogether.
For a bona fide breakout, the stock’s earlier resistance barrier should become its new support level. This only happens if the trading channel that has been established is tested by observing long-term price trends. The strength of the support and resistance levels can be ascertained only through such a study. Despite the risk of misidentification, correctly identifying such stocks can yield considerable returns, even at a price which may not seem attractive at first glance.
Screening Parameters
• Percentage price change over four weeks between 10% and 20% (Stocks which are showing considerable price increases, but whose gains are not excessive.)
• Current Price /52-Week High greater than or equal to 0.9 (Stocks which are trading 90% close to their 52-week highs.)
• Zacks Rank less than or equal to #2 (Only Strong Buy and Buy rated stocks can get through.)
• Beta for 60 months less than or equal to 2
(Stocks which move by a greater degree than the broader market but within a reasonable limit.)
• Current price less than or equal to $20 (Stocks which are reasonably priced.)
These criteria narrow down the universe of over 7739 stocks to only 10.
Here are the top five stocks that meet these criteria:
Lattice Semiconductor Corporation (LSCC - Free Report) designs, develops and markets high performance programmable logic devices and related development system software. Lattice Semiconductor has a Zacks Rank #1 (Strong Buy) and its average EPS surprise over the last four quarters is 83.3%.
CONSOL Coal Resources LP manages and develops active thermal coal operations. CONSOL Coal Resources has a Zacks Rank #1 and its average EPS surprise over the last four quarters is 2.7%.
NOW Inc. (DNOW - Free Report) is a distributor to the energy and industrial sectors. NOW Inc. has a Zacks Rank #1 and its average EPS surprise over the last four quarters is more than 100%.
On Deck Capital, Inc. is an online platform that uses a big data, analytic model to source, underwrite, and fund loans to small businesses. On Deck Capital’s average EPS surprise over the last four quarters is 58.3%. On Deck Capital has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Partners LP (GLP - Free Report) is a distributor of gasoline, residual oil, distillates and renewable fuels to retailers and commercial customers in New England and New York. Global Partners has a Zacks Rank #2 (Buy) and its average EPS surprise over the last four quarters is 42.4%.
You can get the rest of the stocks meeting these criteria by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »