Time New York: Sat 18 Aug 06:06 am  |  Save 15% on H&R Block Online

  
caticonslite_bm_alt

5 Cheap Breakout Stocks for Explosive Returns

Zacks

One of the most popular methods utilized by active investors is to select breakout stocks. The technique seeks to identify stocks whose prices are fluctuating within a specific band. In case a stock falls below the floor of this band, it may be time to offload it from your portfolio. However, a stock breaking above this channel carries the promise of delivering strong gains.

Picking Prospective Candidates

In order to identify breakout stocks, you must first determine their resistance and support levels. A resistance level is the barrier which must be broken so as to be identified as a breakout stock. Meanwhile, a support level is the floor for the stock’s movement.

At the breakout level, demand for a stock has peaked, making it a natural choice for traders. On the other hand, when a stock hits the support floor, traders are eager to offload it. In order to spot breakout stocks, you would have to see which of these are on the brink of breaking the resistance barrier or those that have just breached this level.


Has a Genuine Breakout Occurred?

The primary risk associated with such a strategy is that the decision to buy an apparent breakout candidate has been incorrectly timed. When a stock moves above the resistance level, it should be a highly prized commodity for traders. However, whether such a breakout is at all 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 trading channel that has been established 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 which may not seem attractive at first glance.

Screening Parameters

Percentage price change over four weeks between 10% and 20% (Stocks which are showing considerable price increases, but whose gains are not excessive.)

Current Price /52-Week High greater than or equal to 0.9 (Stocks which are 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.)

Beta for 60 months less than or equal to 2
(Stocks which move by a greater degree than the broader market but within a reasonable limit.)

Current price less than or equal to $20 (Stocks which are reasonably priced.)

These criteria narrow down the universe of over 7904 stocks to only 11.

Here are the top five stocks that meet these criteria:

TheStreet, Inc. TST is a leading web-based provider of original, timely, comprehensive and trustworthy financial news, commentary and information. TheStreet’s average EPS surprise over the last four quarters is more than 100%. TheStreet carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Barclays PLC BCS is a major global banking and financial services company, with over £1.15 trillion ($1.54 trillion) in assets as of Sep 30, 2017. Barclays has a Zacks Rank #2 (Buy) and its average EPS surprise over the last four quarters is 8%.

Horizon Pharma plc HZNP is a biopharmaceutical company focused on identifying, developing, acquiring and commercializing products that address unmet therapeutic needs. Horizon has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 68.9%.

Regions Financial Corporation RF is a financial holding company, providing retail and commercial banking, trust, securities brokerage, insurance brokerage, mortgage and insurance products and services. Regions Financial has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 3.1%.

TechTarget, Inc. TTGT, a leading online Information Technology media company, provides IT companies with ROI-focused marketing programs to generate leads, shorten sales cycles, and grow revenues. TechTarget has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 13.8%.

You can get the rest of the stocks meeting these criteria by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and backtest them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.