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8 Stocks Setting Up to Break Out

Stocks in this article: MCPAVLGMOTIECGRKOLPCXICO

Claude Resources

Another stock that's coming up on a major breakout is Claude Resources (CGR). This company acquires, explores, and develops precious metal properties, as well as produces and markets minerals in Canada. Claude Resources principally focuses on gold. This stock is off to a solid start in 2011, with shares up around 11%. But those gains are going to look like nothing if this stock does what it technically looks poised about to do.

If you take a look at the chart for Claude Resources, you'll see that this stock is setting up to potentially trade above $2.60 to $2.90 a share. Both resistance levels are very significant. The $2.60 level has been an area that the stock has struggled to get over for the past two weeks. The $2.90 area is even more key because it marks the all-time high on the stock.

What I love about the technical action in CGR is that the stock has been in a strong uptrend for quite some time. During this uptrend, CGR has been making higher highs and higher lows, and it's formed a bullish uptrend channel. Another reason to love CGR is because the company is in the right sector at the right time. Gold, as represented by the SPDR Gold Trust (GLD), is only a few points away from breaking out and printing new all-time highs.

Jim Cramer says that half of a stock's move comes from its sector. I agree, and I completely expect CGR to follow any future strength in gold prices. If CGR breaks out to all-time highs, then I see this name doubling or more from current levels. What's great about this play is that you can place a stop if you buy now right around the 50-day moving average of $2.37 or even near the uptrend line at around $2.15.

If CGR trades below either level, then you can dump the stock and move on. However, if it starts breaking out above those resistance levels mentioned earlier, then I would add aggressively and look for an explosive move higher.

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