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5 Reasonable Breakout Stocks for Exceptional Returns

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Utilizing a breakout investment strategy is a natural choice for active investors who settle for nothing less than superlative returns. This involves zeroing in on stocks trading within a tight range and buying them when they step out of this band. In keeping with this approach, they are offloaded whenever they move below this narrow band. If properly implemented, such a strategy could deliver impressive returns.

Identifying Breakout Stocks

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 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 that have just breached this level.

Is this a Genuine Breakout?

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.

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 thanor 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.)

These criteria narrow down the universe of over 7,700 stocks to only 39.

Here are the top five stocks that meet these criteria:

Syneron Medical Ltd.ELOS is a developer, manufacturer, distributor and seller of medical aesthetic devices. It has a Zacks Rank #1 (Strong Buy) and its average positive surprise over the last four quarters is 76.2%

ACCO Brands CorporationACCO is a world leader in branded office products and professional printing. It has a Zacks Rank #1 and its average positive surprise over the last four quarters is 23.9%. You can see the complete list of today's Zacks #1 Rank stocks here .

The Wendy's CompanyWEN is one of the leading quick-service restaurant companies in the world. Wendy's has a Zacks Rank #2 (Buy) and its average beat over the last four quarters is 28.4%.

Enzo Biochem, Inc.ENZ develops, manufactures and markets health care products based on molecular biology and genetic engineering techniques, and provides diagnostic services to the medical community. It has a Zacks Rank #2 and an average positive surprise of 12.5% for the trailing four quarters.

Commercial Vehicle Group, Inc.CVGI supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market. It has a Zacks Rank #1 and its average positive surprise over the last four quarters is more than 100%.

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.

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COMML VEHICLE (CVGI): Free Stock Analysis Report

SYNERON MED LTD (ELOS): Free Stock Analysis Report

ENZO BIOCHEM (ENZ): Free Stock Analysis Report

WENDYS CO/THE (WEN): Free Stock Analysis Report

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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