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Choosing breakout stocks is probably one of the most popular techniques used by active investors. The logic behind this strategy for stock selection is to identify stocks that are trading within a narrow band. Such stocks are to be purchased as soon as they move above this channel and sold when they fall below. In case a stock moves above this band, it usually gains momentum.
However, market watchers often caution against timing such a move incorrectly. This is because there is a significant risk of identifying stock movements as breakouts, even when this is not the case. At the same time, when utilized correctly, this strategy yields substantive gains, which is the reason for its enduring popularity.
To that end, BCB Bancorp, Inc. (BCBP - Free Report) , Verra Mobility Corporation (VRRM - Free Report) , Northeast Community Bancorp, Inc. (NECB - Free Report) and Alithya Group Inc. have been selected as the breakout stocks for today.
Determining Breakout Levels
The first step to selecting the right breakout stock is to calculate its support and resistance level. A support level is the lower bound for stock movements while a resistance level refers to the maximum price which it trades within over a considerable period.
In other words, the demand for a stock is at its lowest at its support level, which means most traders are willing to sell it. At the resistance level, most traders are willing to go long on the stock, which means that they would like to add them to their portfolios. The key to identifying breakout stocks is to zero in on those that are on the verge of a breakout or have just broken above the resistance level.
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 showing considerable price increases, but whose gains are not excessive.)
• Current Price /52-Week High greater than or equal to 0.9 (Stocks 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.)
(Stocks that 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 more than 7,736 stocks to only six.
Here are four of the six stocks that passed the screen:
BCB Bancorp, Inc. is a holding company for BCB Community Bank, a state chartered commercial bank that provides banking products and services to businesses and individuals in the United States.
Currently, BCB Bancorpcarries a Zacks Rank #1. BCBP has an expected earnings growth rate of 3.7% for the current year.
Verra MobilityCorporation is designer and developer of mobility software. VRRM offers speed, bus lane, railroad crossing, and school bus top arm enforcement and enforcement ticketing, as well as crash reports and video-enabled crime data analysis solutions.
Verra Mobility currently carries a Zacks Rank #2. VRRM has an expected earnings growth rate of 25.5% for the current year.
Northeast Community Bancorp, Inc. is the bank holding company for NorthEast Community Bank that provides financial services for individuals and businesses.
Currently, NECB carries a Zacks Rank #2 and has an expected earnings growth rate of 45.3% for the current year.
Alithya Group Inc. is a provider of strategy and digital technology services in North America.
Alithya currently carries a Zacks Rank #2. ALYA has an expected earnings growth rate of 67.4% for the current year.
You can get the rest of the stocks on this list 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.
Image: Bigstock
4 Affordable Breakout Stocks for Stunning Returns
Choosing breakout stocks is probably one of the most popular techniques used by active investors. The logic behind this strategy for stock selection is to identify stocks that are trading within a narrow band. Such stocks are to be purchased as soon as they move above this channel and sold when they fall below. In case a stock moves above this band, it usually gains momentum.
However, market watchers often caution against timing such a move incorrectly. This is because there is a significant risk of identifying stock movements as breakouts, even when this is not the case. At the same time, when utilized correctly, this strategy yields substantive gains, which is the reason for its enduring popularity.
To that end, BCB Bancorp, Inc. (BCBP - Free Report) , Verra Mobility Corporation (VRRM - Free Report) , Northeast Community Bancorp, Inc. (NECB - Free Report) and Alithya Group Inc. have been selected as the breakout stocks for today.
Determining Breakout Levels
The first step to selecting the right breakout stock is to calculate its support and resistance level. A support level is the lower bound for stock movements while a resistance level refers to the maximum price which it trades within over a considerable period.
In other words, the demand for a stock is at its lowest at its support level, which means most traders are willing to sell it. At the resistance level, most traders are willing to go long on the stock, which means that they would like to add them to their portfolios. The key to identifying breakout stocks is to zero in on those that are on the verge of a breakout or have just broken above the resistance level.
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 showing considerable price increases, but whose gains are not excessive.)
• Current Price /52-Week High greater than or equal to 0.9 (Stocks 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.)
No matter whether the market is good or bad, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
• Beta for 60 months less than or equal to 2
(Stocks that 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 more than 7,736 stocks to only six.
Here are four of the six stocks that passed the screen:
BCB Bancorp, Inc. is a holding company for BCB Community Bank, a state chartered commercial bank that provides banking products and services to businesses and individuals in the United States.
Currently, BCB Bancorpcarries a Zacks Rank #1. BCBP has an expected earnings growth rate of 3.7% for the current year.
Verra MobilityCorporation is designer and developer of mobility software. VRRM offers speed, bus lane, railroad crossing, and school bus top arm enforcement and enforcement ticketing, as well as crash reports and video-enabled crime data analysis solutions.
Verra Mobility currently carries a Zacks Rank #2. VRRM has an expected earnings growth rate of 25.5% for the current year.
Northeast Community Bancorp, Inc. is the bank holding company for NorthEast Community Bank that provides financial services for individuals and businesses.
Currently, NECB carries a Zacks Rank #2 and has an expected earnings growth rate of 45.3% for the current year.
Alithya Group Inc. is a provider of strategy and digital technology services in North America.
Alithya currently carries a Zacks Rank #2. ALYA has an expected earnings growth rate of 67.4% for the current year.
You can get the rest of the stocks on this list 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.