Equities entered the weekend a stone’s throw from new highs. And with Friday’s rally placing the S&P 500 oh so close to overhead resistance, many stocks are flashing potential breakout patterns. The appeal of breakout stocks is the clean entry and the good chance for follow through.
The clean, easily identifiable entry comes in the form of an easy to spot resistance zone which acts as the trigger point. Once the stock musters the strength to breach this once impenetrable ceiling, it’s game on for bull trades.
The high chance to follow through is a function of market dynamics. Many short sellers place their stop losses above resistance, reasoning that a break of these price levels justifies exiting. Tack on the fact that many bulls look to buy on a break of resistance and this is a spot where demand swells and supply typically shrinks. And that spells a situation where higher prices are in the offing.
Here are three breakout stocks to buy this week.
3 Breakout Stocks to Buy: Advanced Micro Devices (AMD)
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With recent stumbles by fellow semiconductor stocks NVIDIA (NASDAQ:NVDA) and Micron (NASDAQ:MU), Advanced Micro Devices (NASDAQ:AMD) is one of the only members of this industry still standing. Friday’s jump was particularly noteworthy since it ushered the stock directly into the upper end of its recent base.
With all major moving averages rising beneath the stock in support and confirmation of its uptrend, I see little reason why AMD won’t break out. The key price level to watch this week is $20.28. Hurdling over that will signal the stock is rested and ready to run once more.
My play of choice is selling the September $18.50 puts for cash flow.
3 Breakout Stocks to Buy: World Wrestling Entertainment (WWE)
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Momentum traders have been salivating over this year’s high-octane uptrend in World Wrestling Entertainment (NYSE:WWE). The stock has almost tripled in 2018 with virtually zero pauses. Recently, however, we’ve finally seen some sideways price action to digest its gains. The past month of consolidation has created a few resistance levels to trade off of once WWE stock starts to climb again.
The first zone worth watching this week is $81.50. A pop above that could send WWE back to its recent highs of $86. While it may need some further pausing before resistance gives way, the breakout should be trade worthy.
To capitalize, consider selling the Sep $75/$70 bull put spread for a credit near 80 cents.
3 Breakout Stocks to Buy: Fluor Corp (FLR)
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Fluor Corp (NYSE:FLR) rounds out today’s trio. It sports a beautiful post-earnings high base pattern and is on the verge of breaking out. It’s August 3 earnings release delivered a rousing high volume rally that carried the stock back above its 200-day moving average. FLR now sits in the midst of the previous earnings down gap that has yet to be filled.
A move to $59 will fully close the window, and I suspect buyers will continue to push FLR higher until it happens. The level I’m eyeing is $57. A break of that should signal the next rally is upon us.
Buy the Oct $55/$60 bull call spread for $2.50.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
