4 Stocks Setting Up to Break Out

Netflix(NFLX)

If you're looking for a market leader that is starting to breakout, then look no further than Netflix, a subscription service streaming moves and television episodes over the Internet and sending DVDs by mail to more than 12 million subscribers. This stock has been a go-to name for the past year, with shares up an unbelievable 236%. And it seems like every time I turn around, the news just keeps getting better for Netflix.

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Just today, Netflix announced that it plans to adjust its subscription model to offer a streaming-only plan in the U.S. for $7.99 a month starting in January. The new plan will allow members to instantly watch unlimited moves and TV shows streamed from Netflix to TV sets and computers. This shows that Netflix is changing with the digital world and offering products and services that aren't fighting that trend, but embracing it.

If you take a look at the chart for Netflix, you'll see that stock is trading up sharply on the news by more than 6% and that shares are starting to break out above some previous overhead resistance at around $184.75 a share. This is a significant move because now the stock is trading near all-time highs, which printed this morning at $187.80 a share. When a stock makes an all-time high that means just about everyone who's ever bought it is making money. It also means that everyone who's shorted it is losing money. With Netflix, that's a lot of bears since around 22% of the tradable float is currently sold short as of Oct. 29.

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What I want to see now from Netflix is for the stock to close above or near the breakout level of $184.75 on big volume. The type of volume that I am looking for should be above the three-month average trading volume of 5.2 million shares. With more than 8.1 million shares already traded, that looks highly probable to occur by the time the market closes.

The next reasonable target for Netflix if this trend higher continues should be $200 a share. This is not a stock I would want to short because it's a clear market leader that is defying the laws of gravity and trending higher.

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