The market is poised and ready to take another stab at the 1300 resistance. If it breaks through, it could mean another great bull run.
Which stocks are positioned to benefit if the market makes another profitable move? You might be surprised to learn that some of these breakouts even include dividend paying blue chips.
Scanning for Breakout Stocks
Breakout stocks are typically ones making new price highs with a large spike in volume. However, when we purchase such stocks we want to look for aspects that will increase our odds of the advance sticking, and not simply being a day-trading novelty. (You might also be interested in 15 Low-risk High-growth Stocks That Defy Conventional Wisdom)
To scan for breakout stocks we will look for the following:
- New 52-week highs
- An increase in volume of shares traded
- Minimum of 500,000 shares traded
- Forward P/E of 20 or less
- EPS growth expectations for next 5 years at least 10%
Breakout Stock List
Some Features of the Breakout Stocks
- Low PEG ratios of less than one (price to earnings dividend by growth). These stocks include SI, BZ, TER, GLW. Some believe that growth stocks with low PEG ratios have more reasonable growth valuations and a fair price.
- Low price-to-sales under 1 also reveal which stocks have low valuations when compared to revenue. These stocks include BZ, MRO, and HD.
- Stocks expecting to make over 50% earnings growth next year. This includes ATI and BHI.
- Stocks anticipating more than 15% EPS growth over the next 5 years. This includes ATI, SI, BZ, HAL, and TER. (Read more on Growth Stocks That Analysts Love.)
- Dividend earners might want to look at the following picks with yields over 2%: SI, MRO, EMR, and HD. Many others on the list have smaller dividend yields too.
- Finally, breakout stocks benefit from a high short ratio that may force a margin call. The following stocks have over 5% short ratios: ATI, BZ, TER, and HOC. (Read 21 High Short Interest Ratio Stocks That Might Cash In Soon.)
Again, keep in mind that many breakouts do fail. Also keep in mind that this list has stocks with typically higher betas betas, which means if the S&P 500 breaks through resistance at 1300, they could jump much higher yet. However, when the markets fall, these are often some of the fastest dropping picks. Do your due diligence as always. For those who love tiny stocks, you might want to read 19 High Growth Micro Cap Stocks Under $10.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.