How To Identify Breakout Stocks Early With Finviz Screener

Finding breakout stocks early can be a game-changer for your portfolio. Imagine identifying a stock just before it makes a significant upward move – the potential for profit is substantial. While no method guarantees success, using a powerful stock screener like Finviz can significantly increase your odds. Finviz offers a wealth of data and customizable filters, making it an ideal tool for spotting potential breakout candidates before they become mainstream news.

This post will guide you through the process of using Finviz to identify breakout stocks early. We'll cover key filters, specific strategies, and important considerations to help you build a winning watchlist. Get ready to leverage the power of Finviz and potentially find your next big winner.

1. Understanding Breakout Stocks

Before diving into Finviz, let's define what we mean by a "breakout stock." A breakout occurs when a stock's price moves above a defined level of resistance, suggesting a potential continuation of the upward trend. This resistance level could be a previous high, a trendline, or a specific price point where the stock has struggled to break through in the past. Identifying these breakouts early allows you to capitalize on the momentum and potentially ride the wave of the price increase.

2. Setting Up Your Finviz Account (Free Version Works!)

The good news is you don't need a paid subscription to use Finviz effectively for breakout stock screening. The free version provides ample data and filtering options. Simply head to Finviz.com and familiarize yourself with the interface. The key area we'll be focusing on is the "Screener" tab.

3. Key Finviz Filters for Breakout Stock Identification

Here's a breakdown of the essential filters you'll use in Finviz to narrow down your search for breakout candidates:

  • Market Cap: Consider your risk tolerance and investment goals. Larger market cap stocks (Large, Mid) tend to be more stable, while smaller caps (Small, Micro) offer higher potential returns but also carry greater risk. Start with Mid or Small Cap if you're new to breakout trading.

  • Price: Set a price range that aligns with your budget and trading strategy. Avoid penny stocks (generally under $5), as they are often highly volatile and susceptible to manipulation. A range of $5 to $50 is a good starting point.

  • Volume: Volume is crucial for confirming a breakout. A significant increase in volume accompanying a price breakout suggests strong buying pressure and validates the move. Set the "Relative Volume" filter to "Over 1" or even higher (e.g., "Over 2") to find stocks with above-average trading activity.

  • Average Volume: Ensure sufficient liquidity by setting a minimum average volume. A value of "Over 200K" or "Over 500K" will help you avoid thinly traded stocks, making it easier to enter and exit positions.

  • Price Change: This filter helps you identify stocks that have already started moving. Look for stocks with positive percentage price change today. A range like "Up 2% or more" can highlight stocks showing initial signs of a breakout.

  • Chart Patterns (Technical): This is where Finviz shines. Use the "Pattern" filter to specifically search for chart patterns associated with breakouts. Common patterns to look for include:

    • Double Bottom: Suggests a potential reversal of a downtrend.
    • Double Top: Suggests a potential reversal of an uptrend (avoid for breakout strategies).
    • Triangle (Ascending): A bullish pattern indicating a potential breakout to the upside.
    • Triangle (Descending): A bearish pattern indicating a potential breakout to the downside (avoid for breakout strategies).
    • Channel Up: Stock is trading in an upward channel. Look for a breakout above the channel.

  • Technical Indicators: While chart patterns are helpful, supplementing them with technical indicators can provide further confirmation. Consider these filters:

    • SMA 20: (Simple Moving Average 20-day) – Look for stocks where the price is "Price above SMA20." This indicates the stock is trading above its short-term moving average, suggesting upward momentum.
    • SMA 50: (Simple Moving Average 50-day) – Similar to SMA 20, but over a longer period. "Price above SMA50" strengthens the bullish signal.
    • RSI (14): (Relative Strength Index) – A momentum indicator. Avoid stocks that are significantly overbought (RSI above 70). An RSI between 50 and 70 can be a good range for breakout candidates.

4. Refining Your Search and Analyzing Results

Once you've applied the initial filters, Finviz will display a list of stocks that meet your criteria. Don't blindly buy these stocks! This is just the starting point. Now, you need to analyze the results:

  • Review the Charts: Click on each stock to view its chart. Look for clear resistance levels, volume confirmation, and overall chart health.
  • Check the News: Investigate any recent news or events that might be driving the price action. A positive catalyst can further validate the breakout.
  • Fundamental Analysis (Optional): While breakout trading is primarily technical, a quick look at the company's fundamentals (revenue growth, earnings, etc.) can provide additional confidence.

5. Example Breakout Screen on Finviz

Here's an example of a Finviz screen setup for identifying potential breakout stocks:

  • Market Cap: Small or Mid
  • Price: $5 - $50
  • Relative Volume: Over 1.5
  • Average Volume: Over 500K
  • Price Change: Up 2% or more
  • Pattern: Triangle (Ascending)
  • SMA 20: Price above SMA20
  • SMA 50: Price above SMA50

This screen will identify stocks that are showing signs of breaking out from an ascending triangle pattern, with above-average volume and positive price momentum. Remember to adjust these filters based on your own risk tolerance and preferences.

6. Risk Management is Key

Finding potential breakout stocks is only half the battle. Proper risk management is essential for protecting your capital. Always use stop-loss orders to limit your potential losses. A common strategy is to place the stop-loss order just below the breakout level or the recent swing low. Also, determine your profit target beforehand and have a plan for taking profits when the stock reaches your target.

7. Common Mistakes to Avoid

  • Chasing Overextended Stocks: Avoid buying stocks that have already made a significant move without you. The risk-reward ratio is often unfavorable.
  • Ignoring Volume: A breakout without volume is a weak signal and prone to failure.
  • Skipping Due Diligence: Don't blindly trust the screener. Always analyze the charts, news, and fundamentals before making a decision.
  • Ignoring Market Conditions: Be aware of the overall market trend. Breakouts are more likely to succeed in a bullish market.

8. Beyond the Basics: Advanced Finviz Features

As you become more comfortable with Finviz, explore its advanced features:

  • Backtesting: While limited in the free version, you can manually backtest your screening strategies by reviewing historical data.
  • Alerts: Set up price alerts to be notified when a stock breaks above a specific level.
  • Heatmaps: Use the heatmap feature to quickly identify sectors and industries that are showing strength.

Conclusion: Your Path to Breakout Stock Success

Using Finviz to identify breakout stocks early requires a combination of technical analysis, careful filtering, and disciplined risk management. By understanding the key filters, analyzing the charts, and avoiding common mistakes, you can significantly improve your chances of finding winning trades. Remember that no system is foolproof, and losses are a part of trading. However, with practice and patience, Finviz can become a valuable tool in your arsenal for identifying potential breakout opportunities and achieving your financial goals. Now, go explore Finviz and start building your watchlist!