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TheStreet Open House

5 Stocks Setting Up to Break Out


If you're looking for an emerging-markets stock that could be setting up to break out, then take a look at the action Quepasa (QPSA), which owns and operates, a social network and gaming platform for the Latin community. This stock has trended lower so far in 2011, with shares off by around 30%.

The chart for Quepasa shows that the stock is starting to trade above a key descending trend line that had been acting as resistance on the stock for the past couple of months. This is something that traders need to watch closely on this stock since a strong move above this trend line could signal a bigger move higher is coming for Quepasa.

I would suggest looking for a closing price on Quepasa that puts it above that resistance zone. If you see that, then watch for the stock to start challenging some breakout prices between $8.90 and $9.64 a share. One could buy this stock on a close above the descending trend line that comes on big volume.

I like some of the recent volume on the upside that has already been picking up dramatically. We have had two recent up days where volume was 4.4 million and 2.1 million, which is much, much higher than the three-month average volume of 867,000 shares.

It's worth noting that this is another stock that's heavily shorted. As of May 13, the current short interest as a percentage of the float for Quepasa is a rather large 22.5%. The short-sellers have also increased their bets from the last reporting period by 16.5%, or by around 400,000 shares. This stock could see a big short covering rally soon if we do get

I also highlighted Quepasa recently in " Stocks to Play a Social Networking Bubble."

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