A action which exceeds its support or resistance level is considered a breakout stock. These levels represent price levels that the stock has struggled to exceed during a specific period. Breakouts are considered a strong indicator that the stock is likely to continue its upward trend.
However, it can be difficult to identify leading stocks that will perform well in the future. To spot potential winners, it is necessary to combine analysis and intuition. It is important to remember that invest in individual stocks can be risky, and there is no guarantee that any single stock will perform well. If you need help with your investment plan, a financial advisor can play a valuable role in helping you spot potential actions in the event of a breakdown using their expertise to balance risk and potential rewards.
The bank rate has compiled seven ways to identify and take advantage of potential disruptive stocks.
1. Look for companies with a competitive advantage
If you want to look for stocks that may break out above their resistance level, focus on companies with a competitive advantage. These companies are more likely to outperform their peers, increasing the risks of a breakout. Look for companies with patented technology, strong brand recognition, or unique business models. All of these factors could give them an advantage over their competitors, thereby increasing the risks of a stock market breakout.
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2. Monitor key market trends
Anyone trading in the stock market needs to keep an eye on market trends, and stock traders are no exception. By keeping an eye on market trends, you can identify sectors likely to experience growth in the near future. Pay attention to areas where demand is growing and there is room for new players to enter the market.
3. Monitor volume and price
One way to identify potential breakout stocks is to look for those with increasing volume and price momentum. Breakout stocks often experience a sudden increase in trading volume, which can indicate growing investor interest. Additionally, keep an eye out for stocks that break key resistance levels or form bullish chart patternssuch as cups and handles, ascending triangles or flag designs.
4. Identify companies with strong fundamentals
To identify promising companies, look for those with strong fundamentals, such as increasing revenues, profits and positive cash flow. These indicators suggest that they are doing well financially and that these companies tend to be more likely to fail. You can find these numbers in quarterly reports or with a web search for “(company name) income.”
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5. Track the relative strength of a stock
Even if a stock seems strong, remember that everything is relative. To evaluate a stock, it’s important to compare it to its industry or peers and make sure it’s strong compared to other alternatives. Breakout stocks typically outperform the market and their sector, indicating further growth potential. The Relative Strength Index (RSI) is a technical indicator commonly used to gauge the strength of a stock relative to its peers.
6. Keep an eye on enablers
Catalysts are recent developments that could push stock prices higher. These could include successful product launches, favorable regulatory decisions, or mergers and acquisitions. Also keep an eye out for positive earnings surprises and upward earnings estimate revisions. As you can see, anything that creates a positive outlook for the businessIncome from can contribute to an escape.
7. Release at your target price
Once the stock reaches your price target, it is advisable to exit the position and take your profits. Typically, stocks that rise above their resistance levels often move back down shortly afterward. This is one of the reasons why it is important not to drag your feet when it comes to exiting the position. When that time comes, make sure you move forward and look for your next opportunity.
Although identifying breakout stocks is not an easy task, it can provide a significant benefit to your portfolio. Look for companies that appear strong by checking their fundamentals, benchmarking them against the market, and looking for companies with a competitive advantage. These are just a few of the ways you can profit from breakout stocks that are about to break through their resistance lines.
Screenwriter: Bob Haegele