This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

4 Stock Setting Up to Break Out

By Roberto Pedone

WINDERMERE, Florida (Stockpickr) -- Stock traders are starting to get frustrated with the action in the markets. For the past 11 trading sessions, the S&P 500 has been stuck in a trading range between 1150 on the upside and 1130 on the downside. While this action might be frustrating for many, it can also be viewed as a healthy consolidation before the next leg higher.

Of course, the bears would tell you this action is toppy and stocks are being distributed before the rug is pulled out from underneath the market bulls. That could very well be at play here, which is way it's always important to let the price action in the market provide you with clues to the next move.

Now, if the S&P can manage to breakout above 1150 on strong volume, then stocks should setup to soar towards the yearly highs at around 1220. However, if we break below 1130 and volume starts to expand dramatically, then stocks are probably going back towards 1040, if not even lower. I think the market is going to make a massive move, no matter which way it decides to break, due to the energy that has been built up in the markets in the past couple of months as seen by the wild swings in stock prices. Also, investor sentiment has been swinging wildly from bullish to bearish and vice versa.

Also: 3 Technical Setups to Watch

This is usually a recipe for a giant move because it means that market players have a lot of conviction about their direction trades on both sides. Think of it as a battle field where the longs and shorts are bunkering down and preparing for war. At some point, one group is going to get trapped and caught on the wrong side. This will be where the big energy comes from to produce a gigantic move.

Trading breakouts is not a new game on Wall Street. This strategy has been pioneered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. A breakout occurs when a stock makes a move through a significant level of support or resistance, which is usually followed by heavy volume and increased volatility. Wall Street players love to see an upside breakout because it demonstrates strength in the underlying asset as the price breaks above a level of previous resistance. An upside breakout can also take a stock to new highs, which will generate a lot of interest as the stock shows up on sophisticated software that scans for this type of action.

Also: Charts of the Week: Coinstar, Denny's, China Nepstar

Here 's a look at a number of stocks that are already breaking out, or could be setting up to become solid breakout stock plays

1 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs