Breakthrough and Pullback: A Tactical 5-Stock Watchlist for 2026

The core of this watchlist is a tactical, event-driven approach. We're targeting stocks at key inflection points where a clear technical setup aligns with an imminent fundamental catalyst. This is particularly relevant in a consolidating market, where price action often gets stuck between moving averages, creating opportunities for those who can spot the breakout or the smart pullback.

Our filter is quantitative and focused. We start with a composite score threshold of greater than 70. This score combines relative price strength, earnings momentum, and technical pattern recognition. It helps us identify stocks with strong underlying momentum, not just random price moves. From there, we look for two specific technical signals: a Breakthrough (BRK) or a Pullback (PBK) to key moving averages like the 50-day or 200-day. The strategy requires a stock to have solid relative price strength, typically not falling below 80 on the RPS scale, even during a pullback.

The focus is on small-cap and emerging growth names, where catalysts can drive disproportionate moves. The recent market sentiment data shows the broader indices are consolidating, with the average score dipping slightly. In this environment, waiting for a confirmed technical signal combined with a fundamental event-like an earnings report or a product milestone-can create a favorable risk/reward setup. The goal is to enter on the signal, not the rumor, and ride the momentum generated by the catalyst.

Stock 1: Liquidia Corporation (LQDA) - The Breakout Setup

Liquidia's stock is making a clear technical move. The shares surged 14.36% on January 9, 2026, a sharp breakout that followed the company's announcement of promising Phase 3 trial results. This technical signal is now firmly anchored to a strong fundamental catalyst: the rapid commercial launch of its pulmonary hypertension drug, YUTREPIA.

The numbers behind YUTREPIA's uptake are compelling. Preliminary 2025 results show the drug generated $148.3 million in net product sales, including $90.1 million in the fourth quarter alone. This explosive start, supported by over 2,800 unique patient prescriptions, has already translated into tangible financial flexibility, producing over $30 million in positive fourth-quarter cash flow. For a company that has historically operated at a loss, this cash generation is a critical step toward funding its own growth.

The setup here is classic event-driven: a clinical catalyst (Phase 3 results) has re-rated the stock, while a commercial catalyst (YUTREPIA sales) provides a near-term revenue runway. The technical breakout on the news suggests the market is pricing in this improved trajectory. However, the risk is immediate and severe. The stock trades at a price-to-sales ratio of 38.95 and carries a negative EBIT margin of -157.1%. This valuation is a bet that YUTREPIA's current growth rate is sustainable and that the company can eventually convert sales into profits. Any stumble in prescription momentum or a delay in the commercial ramp would likely trigger a sharp re-rating, as the high multiple leaves little room for error. The breakout is real, but the path above the 50-day moving average now depends entirely on flawless execution.

Stock 2: BridgeBio Pharma (BBIO) - The Pullback Opportunity

BridgeBio Pharma presents a classic tactical setup: a high-conviction stock pulling back to a key technical support level. The shares have a composite score of 95.13, a standout figure that signals exceptional strength across relative price performance, earnings momentum, and technical patterns. The current signal is a Pullback (PBK) to the 50-day moving average, a classic entry point for momentum traders when the underlying fundamentals remain robust.

This high score is notable because it persists even as the broader market sentiment shows signs of cooling. The average market score has dipped, indicating a more cautious environment. Yet BBIO's score remains elevated, suggesting the stock is outperforming its peers on both technical and fundamental metrics. This divergence can create a favorable risk/reward: a pullback in a strong stock often offers a better entry than chasing a breakout in a weak one.

The primary risk here is the inherent volatility of the biotech sector. BridgeBio's valuation and future trajectory are almost entirely dependent on the successful progression of its clinical pipeline. Any delay, setback, or negative readout from a trial could trigger a sharp and swift sell-off, regardless of the technical setup. The high composite score reflects past strength and momentum, but it does not insulate the stock from the binary outcomes that define biotech investing. The pullback opportunity is real, but it is a bet on the company's pipeline staying on track.

Stock 3: FTAI Aviation (FTAI) - The Breakout from a Low Base

FTAI Aviation is a clear technical breakout candidate, signaling a move from a low base. The stock has a composite score of 88.28 and a standout RPS (max) of 91.887. This high score combination, which the model flags as a "Breakthrough" (BRK) pattern, indicates the shares are outperforming the market on both technical momentum and relative strength metrics.

The setup is particularly compelling in the context of the broader aviation services sector. As air travel demand recovers from pandemic lows, companies like FTAI that provide critical ground and maintenance services stand to benefit directly. The technical breakout suggests the market is starting to price in this cyclical tailwind, with the stock moving decisively above key moving averages.

Yet the core risk here is the stock's deep exposure to the airline industry's cycles. Aviation services are a discretionary expense for carriers, making FTAI's revenue and profitability sensitive to fuel prices, economic downturns, and any future travel slowdown. This creates a classic event-driven vulnerability: the breakout could be a leading indicator of a sector recovery, but it also sets the stock up for a sharper pullback if macroeconomic or industry conditions deteriorate. The high technical score reflects current momentum, but the fundamental outlook remains tied to a volatile cycle.

Stock 4: Roivant Sciences (ROIV) - The High-Flying Pullback Candidate

Roivant Sciences is a clear technical pullback candidate, trading at a premium valuation that demands flawless execution. The stock has a composite score of 86.66, a standout figure that signals exceptional strength across its technical and relative price metrics. Its RPS (max) of 93.262 and a Buy/Sell rating of 97.9 confirm it is a major outperformer, consistently beating the market. The current setup is a Pullback (PBK) to the 50-day moving average, a classic tactical entry point for momentum investors.

The high score reflects Roivant's status as a biotech "platform" player. The model's quantitative system recognizes its outperformance, but the underlying thesis is a bet on its pipeline velocity and commercial success. This premium is typical for such companies, which command high valuations based on future potential rather than current earnings. The risk here is the valuation itself. A stock priced for perfection leaves no room for error. Any disappointment in clinical progress, regulatory timelines, or commercial uptake could trigger a significant re-rating, as the high multiple is not sustainable without consistent positive catalysts.

The tactical setup is straightforward: a high-conviction stock pulling back to key technical support. For a trader, this offers a potential entry before the next leg up. But the event-driven nature of biotech means the catalysts are binary and unpredictable. The pullback is a technical signal, but the fundamental story remains fragile. The stock's path above the 50-day average now depends entirely on Roivant delivering on its pipeline promises, without a single misstep.

Stock 5: Carpenter Technology (CRS) - The Value Pullback

Carpenter Technology offers a classic value-oriented pullback setup. The stock has a composite score of 82.55 and a Buy/Sell rating of 72.1, indicating it is a quality, outperforming stock that may be consolidating after a period of strength. Its technical signal is a Pullback (PBK) to the 50-day moving average, a classic entry point for investors seeking a better price in a fundamentally sound name.

The company operates in a more defensive, industrial sector as a specialty metals manufacturer. This positioning provides a buffer against the extreme volatility seen in high-growth sectors like biotech or tech. In a consolidating market, such defensive characteristics can be an advantage, offering less dramatic swings and a steadier cash flow profile. The high composite score suggests the market still views CRS as a relative strength leader, even during a pullback.

The key risk is straightforward: slower growth. Compared to the explosive, binary catalysts driving stocks like Liquidia or Roivant, Carpenter Technology's trajectory is more about steady execution and industrial demand cycles. This means the stock is unlikely to deliver a 10-bagger move, but it also avoids the severe downside that comes with failed clinical trials or pipeline setbacks. For a tactical investor, the pullback to key technical support offers a chance to enter a quality industrial name at a potentially more attractive price, trading off some growth for reduced volatility.

Overall Risk/Reward and Trading Considerations

The watchlist presents a clear tactical framework: capitalize on technical signals where strong momentum meets an imminent catalyst. However, the setup demands disciplined risk management. The primary risk is valuation. Several stocks trade at extreme multiples, making them vulnerable to any disappointment. Liquidia Corporation's price-to-sales ratio of 38.95 is a stark example, pricing in near-perfect execution of its commercial launch. This leaves no margin for error; a stumble in prescription momentum could trigger a sharp re-rating, as seen in the stock's high volatility and negative EBIT margin.

A secondary, but significant, risk is sector concentration. The list is heavily weighted toward biotech, with BridgeBio Pharma, Liquidia, and Roivant Sciences all in the pipeline-driven space. This creates a concentrated bet on clinical and regulatory outcomes, which are inherently binary and unpredictable. In a broader market that is consolidating, with the average score dipping slightly, this concentration amplifies the portfolio's vulnerability to sector-specific headwinds or sentiment shifts.

For tactical execution, focus on position sizing and hard stop-loss levels. Given the high-risk nature of the breakout plays like Liquidia and FTAI Aviation, these should be treated as smaller, speculative positions. For the pullback candidates like BridgeBio and Roivant, the higher composite scores suggest stronger underlying momentum, but the stop-losses should still be tight, anchored to the 50-day moving average support. The goal is to enter on the signal, but to exit decisively if the technical or fundamental catalyst fails to materialize. In this environment, the reward is the potential for a breakout; the cost of failure is a swift, clean exit.