Breakout stock picking continues to be one of the most popular methods used by active investors. This technique seeks to identify stocks whose prices vary within a specific band. If a stock falls below the lower limit of that band, it might be time to remove it from your portfolio. However, a stock-out above this channel holds the promise of generating significant gains.
Identify actions in the event of a breach
The first step in selecting the right breakout stocks is to calculate their support and resistance levels. A support level is the lower limit of stock movements, while a resistance level refers to the maximum price it is trading in over a considerable period of time.
In other words, 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 be long on the action, which means they would like to add them to their portfolios. The key to identifying stocks in the event of a breakout is to identify which ones are on the verge of a breakout or which have just broken the resistance level.
To this end, Capital Product Partners LP CPLP, Transphorm, Inc. TGAN, Arlo Technologies, Inc. ARLO and Provident Financial plc FPLPY have been selected as disruptive stocks for today.
Check if it’s real
Stocks that are above their resistance level should ideally be in high demand for traders. But the test of whether this is a true breakout is if they continue to hit higher prices and the old barrier becomes new support. This is why it is important to determine if a long term price trend is about to emerge.
Only a study of long-term trends can determine whether the existing trading channel has indeed been broken. This indicates the strength of the support or resistance levels. If you can identify the effective channel for a stock, choosing it even at a not-so-reasonable price would give you big returns.
â¢ Four-week percentage price change between 10% and 20% (Stocks showing significant price increases, but not gaining too much.)
â¢ Current / 52 week high price greater than or equal to 0.9 (Stocks are trading 90% near their 52-week highs.)
â¢ Zacks Rank less than or equal to # 2 (Only actions rated Strong Buy and Buy can pass.)
Whether the market is good or bad, stocks with a Zacks # 1 (strong buy) or 2 (buy) rank have a proven history of outperforming. You can see The full list of today’s Zacks # 1 Rank stocks here.
â¢ Beta for 60 months less than or equal to 2
(Stocks that move more than the broader market, but within a reasonable limit.)
â¢ Current price less than or equal to $ 20 (Actions at a reasonable price.)
These criteria reduce the universe from over 7,706 stocks to just six.
Here are four of the six actions that passed the screen:
Capital Product Partners LP is an international shipping company providing maritime transportation of refined petroleum products and chemicals. The CPLP product tanker fleet is fully chartered under medium and long term bareboat charters.
Capital Product Partners holds a Zacks # 1 rank and has an expected earnings growth rate of 49.6% for the current year.
Transphorm, Inc. is a designer and manufacturer of GaN semiconductors for high voltage power conversion applications. TGAN produces JEDEC and AEC-Q101 GaN semiconductor devices.
Currently, Transphorm holds a Zacks # 2 rank and has an expected earnings growth rate of 52.4% for the current year.
Arlo Technologies, Inc. is a provider of smart connected devices to monitor real-time environments with Wi-Fi or cellular connection. ARLO’s cloud-based platform provides users with visibility, insight, and a powerful means to help protect and connect in real time. Its connected devices, including Wi-Fi and wireless LTE smart cameras, advanced baby monitors, and smart security lights.
Arlo Technologies is ranked second in Zacks and has an expected profit growth rate of 77.1% for the current year.
Financial foresight plc is a financial services provider. It offers credit cards, secured loans, home loans, online installment loans, and auto finance under the Vanquis Bank, glo, Provident, Satsuma Loans and Moneybarn brands.
Provident Financial holds a Zacks # 2 rank and has an expected earnings growth rate of over 100% 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 of the Research Assistant and start using this screen in your own trading. In addition, you can also create your own strategies and test them out before you get into investing.
The Research Assistant is a great place to start. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your research assistant trial today. And the next time you read an economic report, open the research assistant, plug in your findings, and see what gems come out of it.
Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.
Disclosure: Information on the performance of Zacks’ portfolios and strategies can be found at: https://www.zacks.com/performance.
5 actions in the process of doubling
Each has been handpicked by a Zacks expert as the # 1 favorite stock to earn + 100% or more in 2021. Previous recommendations have climbed + 143.0%, + 175.9%, +498 , 3% and + 673.0%.
Most of the stock in this report is flying under Wall Street’s radar, which provides a great opportunity to get into the ground floor.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.