Zacks.com Featured Highlights Include: Monotype Imaging, MAG, Barrick Gold, Loop Industries And Nomura
Zacks Investment Research | Aug 06, 2019 11:11PM ET
For Immediate Release
Chicago, IL – August 5, 2019 - Stocks in this week’s article are Monotype Imaging Holdings Inc. (NASDAQ:TYPE) , MAG Silver Corp. (NYSE:MAG) , Barrick Gold Corporation (NYSE:GOLD) , Loop Industries, Inc. (NASDAQ:LOOP) and Nomura Research Institute, Ltd. (OTC:NRILY) .
5 Breakout Stocks for Superlative Returns
As favored a strategy as it is divisive, picking breakout stocks is one of the most popular techniques among active investors. The idea is fairly simple -- to identify stocks trading within a narrow band and buying them when they move above this channel or sell when they move below. If a stock moves above the channel, it promises substantial gains for investors.
But critics warn of the risk of timing such a move or identifying a wrong breakout level. However, when executed correctly, this strategy can yield lucrative gains, which explains its enduring popularity.
Identifying Breakout Levels
The key to this strategy is calculating the support and resistance levels of a stock. The floor of a stock’s trading channel is its support level and it should be sold as soon as it threatens to fall lower. On the other hand, the resistance is a stock's breakout level and it can gain substantially if it breaks the resistance level.
When a stock is close to its support level, demand is literally hitting the floor. On the other hand, demand rises when it is breaching its resistance level, signaling the right time to make a lucrative addition to your portfolio. The idea is to pick stocks which have just broken above their resistance barriers or are very closing to doing so.
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 genuine 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.
For the rest of this Screen of the Week article please visit Zacks.com at: Zacks Investment Research
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