Data Insights

6 ASX stocks showing signs of a potential breakout

Fri 05 May 23, 5:03pm (AEST)
Markets trading screen with stocks
Source: Shutterstock

Key Points

  • Technical analysis is the other side of the coin to fundamental analysis
  • Market Index regards breakouts as indicators of the potential for a potential price trend

In investing – as in most areas of modern life – everyone’s looking for an edge. And here at Market Index, we spend a lot of time looking at data to see what’s happening in the ASX.

Most professional investors concede they have no special insights into what will happen in financial markets on any given day, week, or other time period. It’s their process through which they try to get an edge on the broader market – how they choose which stocks to invest in, and when.

Fundamental analysts study everything from the overall economy and industry conditions to the financial strength and management of individual companies. Earnings, expenses, assets, and liabilities all come under scrutiny by fundamental analysts.

Technical analysis is the other side of the coin. It hinges on analysing statistical trends, with traders seeking to identify opportunities by looking at patterns in things such as stock price movements and volumes.

In the following article, I focus on one aspect of technical analysis: the breakout.

What is a breakout?

The term describes a “tradeable event” when the share price of a listed company, ­or an index of stocks, moves beyond a level at which it has traded for an extended period of time.

CMC Markets describes it this way: “A breakout is when a stock or stock index moves beyond a level of support and resistance​​ that it has struggled to move above or below in the past.”

“Learning how to identify and trade potential breakout stocks gives traders one more tool that they can use to generate profits within an often-volatile market,” CMC says.

Breakout stocks are shown on price charts, in particular, using candlestick charts​​ to read price action.

Market Index regards breakouts as indicators of the potential for the price to start trending in the breakout direction. For example, a breakout to the upside from a chart pattern could indicate the price will start trending higher.

The resistance or support level becomes a line in the sand that many traders use to set entry points or stop-loss levels. When the price breaks through the support or resistance level traders waiting for the breakout jump in, and those who didn't want the price to "breakout", exit their positions to avoid larger losses.

Breakouts that occur on high volume (relative to normal volume) show greater conviction, which means the price is more likely to trend in that direction.

The following companies have displayed a potential for breakouts, as identified by Market Index’s Breakout Scan tool. Scans are conducted after market close each day.

Askari Metals (ASX: AS2)

Market cap: $26.4 million

Latest closing price: 42 cents

An Australian explorer, Askari owns several Australian copper and gold projects, in addition to its Uis Lithium Project in Namibia.

Askari on Thursday finalised a strategic deal with Chinese battery metals major Huayou, a subsidiary of $18 billion Shanghai-listed Zhejian Huayou Cobalt Co.

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Cogstate Ltd (CGS)

 Market cap: $295 million

 Latest closing price: $1.71

The neurological testing business made headlines back in February amid speculation about a potential leaking of details around a potential acquisition bid – which was later abandoned.

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Caspin Resources (CPN)

Market cap: $28.8 million

Latest closing price: 33 cents

Caspin Resources Limited is a new mineral exploration company based in Perth, Western Australia. It previously owned a 50% stake in West Musgrave nickel and copper project that is now owned by BHP.

It listed back in 2020 after a restructure that saw another part of the company – Cassini Resources – demerged and folded into Oz Minerals, as reported by the AFR. The company was in line for a potential payment from Oz Minerals if it ever sold West Musgrave – a payment that would have been worth as much as $20 million. But last month, the Federal Government ruled otherwise, concluding the acquisition didn’t trigger the payment. 

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Electro Optic Systems (EOS)

Market cap: $136.5 million

Latest closing price: 79 cents

An Australian technology, EOS creates products and services for customers in the defence, space and communications sectors. 

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Greentech Metals (GRE)

Market cap: $5.4 million

Latest closing price: 17 cents

The lithium explorer was established to discover, develop, and acquire projects in Australia and overseas. Its projects, primarily in Western Australia’s West Pilbara and Fraser Range provinces are also focused on nickel, copper and cobalt.

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WA1 Resources (ASX: WA1)

Market cap: $97.5 million

Latest closing price: $2.74

The resources junior owns 100% of three West Australian exploration projects prospective for copper and gold. These are the West Arunta Project, the Madura Project and the Hidden Valley Project.

WA1 found niobium, a critical rare earths mineral, at its West Australian Artuna Project in late 2022.

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Written By

Glenn Freeman

Content Editor

Glenn is a Content Editor at Livewire Markets and Market Index. Glenn has almost 20 years’ experience in financial services writing and editing. Glenn’s journalistic experience also spans energy and automotive, in both Australia and abroad – including the Middle East – where he edited an oil and gas publication in the United Arab Emirates.

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