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5 Bargain Breakout Stocks for Extraordinary Returns
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As popular as it is divisive, a breakout strategy is one of the most frequently used techniques among active investors. The idea is fairly simple -- to identify stocks trading within a narrow band and buy them when they move above this channel or sell when they move below. If a stock moves above the channel, it promises substantial gains for investors.
But critics warn against the risk of timing such a move incorrectly or identifying the wrong breakout level. However, when executed correctly, this strategy can yield lucrative gains, which explains its enduring popularity.
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 those that have just broken above the resistance level.
Is this a Genuine Breakout?
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 genuine 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.)
• 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 7,889 stocks to only six.
Here are the top five stocks that meet these criteria:
Net 1 Ueps Technologies Inc. provides its universal electronic payment system as an alternative payment system across various sectors across the world. Its average EPS surprise over the last four quarters is 14.1%
Nova Measuring Instruments Ltd. (NVMI - Free Report) develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. Its average EPS surprise over the last four quarters is 31.1%.
TIM Participações S.A. offers mobile cellular services throughout Brazil. TIM Participações’ average EPS surprise over the last four quarters is 4.7%
Cross Country Healthcare, Inc. (CCRN - Free Report) is engaged in providing healthcare recruiting, staffing and workforce solutions. Its average EPS surprise over the last four quarters is 29.5%.
1st Constitution Bancorp occupies an enviable position as one of New Jersey's few independent community banks. Its average EPS surprise over the last four quarters is 21.3%.
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 Bargain Breakout Stocks for Extraordinary Returns
As popular as it is divisive, a breakout strategy is one of the most frequently used techniques among active investors. The idea is fairly simple -- to identify stocks trading within a narrow band and buy them when they move above this channel or sell when they move below. If a stock moves above the channel, it promises substantial gains for investors.
But critics warn against the risk of timing such a move incorrectly or identifying the wrong breakout level. However, when executed correctly, this strategy can yield lucrative gains, which explains its enduring popularity.
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 those that have just broken above the resistance level.
Is this a Genuine Breakout?
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 genuine 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 equal to #1
(Only Strong Buy stocks can get through. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)
• 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 7,889 stocks to only six.
Here are the top five stocks that meet these criteria:
Net 1 Ueps Technologies Inc. provides its universal electronic payment system as an alternative payment system across various sectors across the world. Its average EPS surprise over the last four quarters is 14.1%
Nova Measuring Instruments Ltd. (NVMI - Free Report) develops, produces and markets monitoring and measurement systems for the semiconductor manufacturing industry. Its average EPS surprise over the last four quarters is 31.1%.
TIM Participações S.A. offers mobile cellular services throughout Brazil. TIM Participações’ average EPS surprise over the last four quarters is 4.7%
Cross Country Healthcare, Inc. (CCRN - Free Report) is engaged in providing healthcare recruiting, staffing and workforce solutions. Its average EPS surprise over the last four quarters is 29.5%.
1st Constitution Bancorp occupies an enviable position as one of New Jersey's few independent community banks. Its average EPS surprise over the last four quarters is 21.3%.
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 »