So far in October, U.S. stocks have remained volatile but broadly resilient. To boost returns amid uncertainty, investors should take a more active approach to stock selection, focusing on potential breakouts within clearly defined price ranges. 

In this strategy, a stock should be sold if it falls below the lower band, while stocks breaking above the upper band signal a potential breakout and an opportunity to stay invested to capture further upside momentum. 

Using this framework, Richardson Electronics, Ltd. (RELL Quick QuoteRELL - Free Report) , Talos Energy Inc. (TALO Quick QuoteTALO - Free Report) and Patterson-UTI Energy, Inc. (PTEN Quick QuotePTEN - Free Report) emerge as potential breakout stocks. 

Identifying Breakout Stocks With Strong Upside Potential 

To pick a breakout stock, calculate support and resistance levels. A support level is the lower bound for stock movements, while a resistance level is the maximum price it trades at over a considerable period. 

In other words, demand for a stock is lowest at its support level, meaning most traders are willing to sell it. At the resistance level, most traders are willing to go long the stock, indicating they would like to add it to their portfolios. The key to identifying breakout stocks is to zero in on those on the verge of a breakout or those that have just broken above resistance. 

Has the Stock Breakout Been Confirmed? 

The main risk of this strategy is buying an apparent breakout candidate at the wrong time. When a stock moves above the resistance level, it should be highly prized by traders. However, whether such a breakout is 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 established trading channel 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 that may not seem attractive at first glance. 

Research Wizard’s Stock Screening Criteria 

• 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.)

Regardless of whether the market is strong or weak, stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have a proven track record of outperforming the market. 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 more than the broader market but within a reasonable limit.) 

• Current price less than or equal to $20 (Stocks reasonably priced) 

These criteria narrow the universe of more than 6,853 stocks to only 16. 

Here are the top three stocks: 

Richardson Electronics 

Richardson Electronics supplies engineered solutions, power grid and microwave tubes, and related consumables across the Americas, Asia-Pacific and Europe. Richardson Electronics has a Zacks Rank #1. RELL’s expected earnings growth rate for the current year is 95%. 

Talos Energy  

Talos Energy explores for and produces oil and natural gas in the United States and Mexico. Talos Energy has a Zacks Rank #2. TALO’s expected earnings growth rate for the current year is 315.5%. 

Patterson-UTI Energy 

Patterson-UTI Energy provides drilling and completion services to oil and gas companies across North America and international markets. Patterson-UTI Energy has a Zacks Rank #2. PTEN’s expected earnings growth rate for the current year is 100%.