The S&P 500 has surged to new highs in July, and several big-name stocks are setting up for big upside breakouts as well. As we all know, in trading nothing is guaranteed. These stocks could drift lower, or pop to the upside and then quickly fail with a big move back to the downside. That is why I always utilize stop losses when trading breakout stocks. Give them a bit of room, but if they don’t move as expected, get out.
Here are some of the US stocks I have my eye on right now. This is not investment advice, nor a recommendation to buy or sell. These are simply stocks I am monitoring, and I have provided my basic strategy for how I want to trade them. That strategy may change based on how the price action unfolds going forward.
Amazon is forming a big cup and handle extending back to late 2018, and is also forming a shorter-term cup and handle between May and July of 2019. This is all happening below the 2018 high of $2050.50. That high is less than 6% away from the current price of $1939.
Ideally, I would like to see this stock consolidate for a little while longer underneath $1960. But I would be compelled to buy if the price moves above $1960 on a big volume day. Stop loss would go below the most recent consolidation. Exact trade levels may change depending on if a consolidation develops near the current price. If a consolidation forms below $1960, that could mean a lower entry price (buying on a breakout above the consolidation).
This stock is consolidating near $90, and also has the potential to break out of a large cup and handle pattern. The company has seen strong sales and earnings growth over the last few years. I would love to see the stock move sideways in a tight range below $92, and then break above $92 on big volume. That would be a great signal for me to get in. But we will need to wait and see. Right now, a move above $92, on big volume, looks like the entry. A consolidation with highs below $92 could alter that slightly (would buy on upside consolidation breakout).
Reward-to-risk is about 2:1 based on the estimated levels, although those could change depending on how the price action unfolds from here.
Cyber-Ark Software (CYBR)
Price is moving sideways after a big rally. There are a couple of ways to trade this. If the price drops below $119, watch to see if it rallies back above it shortly after. That would indicate a false breakout to the downside. After a false breakout, if the price can push higher for a couple of sessions, there is a good chance it will have enough steam to break above the $138.73 high. This provides the best reward:risk.
Another option is to watch for the price to edge up toward the $135 area and consolidate there (for a similar pattern, look at January 2019). If that occurs, that consolidation will provide the potential entry and stop loss areas. I’ll be looking to buy on a consolidation breakout to the upside, with a stop loss below the consolidation. Since that consolidation hasn’t formed yet, I don’t have trade levels for that setup. If the price can close above $131 (trade levels shown) or $135 on big volume, that would also be of interest for an entry.
Woodward (WWD) has a similar pattern. Watching for a breakout in this high momentum stock. Volatility should contract before the breakout, as it did between February and April. Without the volatility contracting, the pattern is too loose and is more likely to fail if it attempts the upside breakout.
This isn’t an imminent trade. A big cup and handle is forming, but the recent price action is wedged up. That typically doesn’t lead to strong upside breakouts. More often than not, that type of action near a former high leads to another pullback and then a rally. Therefore, I have put this one on the watchlist because IF it does pull back, and then rebounds quickly back to the $13, that will likely be the buying opportunity. I have not put trade levels yet. But have marked similar patterns in the past. The red lines mark price action that wedged up near the end of the cup and handle, and the small green lines mark price action that moved slightly lower or sideways. A move that is sideways or slightly lower generally leads to a stronger upside breakout, while the wedge up typically leads to a drop. There are exceptions, like the wedge up in February. The price did move higher from there.
These are just a few of the great setups that are out there right now. There are quite a few other stocks that have awesome upside breakout setups right now. Netflix (NFLX) is another one to keep an eye on. While it is possible that the stock market could reverse lower after making new highs, that is not an assumption I want to make. Right now, the stock market is strong and that means I want to be involved.