5 Breakout Stock Plays
An example of a recent successful breakout trade is non-metallic mining player China Shen Zhou Mining & Resources (SHZ) which I featured in Dec. 20's " 8 Stocks Under $10 Moving Higher ." I mentioned in that piece that SHZ had been uptrending strongly for the last two months, with shares making mostly higher lows and higher highs, which is bullish technical price action. I pointed out that SHZ was starting to move within range of triggering a breakout trade once it cleared some near-term overhead resistance levels at 42 cents to 45 cents per share with high volume.
Guess what happened? Shares of SHZ went on to trigger that breakout and huge volume poured into the stock. That resulted in a big move from 42 cents to an intraday high on Dec. 20 of 51 cents per share. Anyone who caught that breakout trade was able to register quick gains on a stock that confirmed the move with price and volume. Shares of SHZ are now setting up again for another potential breakout trade if it can manage to clear 50 to 55 cents with high volume. If we get that move, then SHZ could make a run at its 200-day moving average of 68 cents per share.
Breakout candidates are something that I tweet about on a daily basis . I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.
Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.
With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels .
One name that's trending very close to triggering a major breakout trade is RealD (RLD) , which is global licensor of 3D technologies. Its extensive intellectual property portfolio enables a premium 3D viewing experience in the theater, the home and elsewhere. This stock has been hit by the sellers during the last six months, with shares down by 26%.