5 Attractively Priced Breakout Stocks Offering Strong Returns

Picking breakout stocks is one of the most well known strategies utilized by active investors. The key to picking these stocks is to select those whose price varies, but whose movement remains restricted to a narrow band. To accurately implement such a strategy, investors must pick stocks which have just broken above such a channel or are just about do so.

Losses could be in store for investors if they time their purchases incorrectly. At the same time, identifying the right breakout stocks offers the promise of significant gains to investors.  This is the primary reason for its enduring popularity.

Determining Breakout Levels Correctly

To spot breakout stocks, the investor 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, the demand for the 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 which have just breached this level.

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 $15 (Stocks which are reasonably priced.)

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