5 Affordable Breakout Stocks Offering Excellent Returns

Investors with an active approach often utilize a breakout investment strategy in their quest for appreciably high returns. This involves zeroing in on stocks trading within a tight band and buying them when they move out of this band. In keeping with this approach, such stocks are sold whenever they move below this narrow band. If properly implemented, such a strategy has the ability to deliver impressive returns.

Determining 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 close to doing so.

Has a Breakout Really 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 7862 stocks to only 8.
 
Here are the top five stocks that meet these criteria:

Akari Therapeutics, Plc AKTX is a biopharmaceutical company. It focuses on the development and commercialization of innovative therapeutics to treat orphan autoimmune and inflammatory diseases. Its average EPS surprise over the last four quarters is 87.4%. Akari Therapeutics carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Joint Corp. JYNT is a healthcare franchisor of chiropractic clinics.  Joint Corp. has a Zacks Rank #2 (Buy) and its average EPS surprise over the last four quarters 5.5%.

Tailored Brands, Inc. TLRD is a specialty retailer of men's suits and provider of tuxedo rental product primarily in the U.S. and Canada. Tailored Brands has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 3.9%.

Ardelyx, Inc. ARDX is a clinical-stage biopharmaceutical company. It discovers, develops and commercializes small molecule therapeutics that work in the gastrointestinal tract to treat cardio-renal, GI and metabolic diseases. Ardelyx has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 8.5%.

BioTime, Inc. BTX is a clinical-stage biotechnology company focused on developing and commercializing novel therapies in the field of regenerative medicine. BioTime has a Zacks Rank #2 and its average EPS surprise over the last four quarters is 33.3%.

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.

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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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BioTime, Inc. (BTX) : Free Stock Analysis Report
 
Ardelyx, Inc. (ARDX) : Free Stock Analysis Report
 
The Joint Corp. (JYNT) : Free Stock Analysis Report
 
Tailored Brands, Inc. (TLRD) : Free Stock Analysis Report
 
Akari Therapeutics PLC (AKTX) : Free Stock Analysis Report
 
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