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TheStreet Open House

5 Stocks Poised to Break Out

Stocks in this article: LLENACTGDNNAMRNCRIS

L&L Energy

One stock that looks ready to breakout is L&L Energy (LLEN), which is engaged in the businesses of coal mining, coal washing, coal coking and coal wholesaling. L&L Energy's operations are conducted in Yunnan and Guizhou provinces in the southwest region of China. This stock has been hammered by the bears so far in 2011 with shares off by over 40%.

If you take a look at the chart for L&L Energy, you'll see that this stock is approaching some key breakout levels that traders need to be watching. The first breakout level that the stock has already punched through is its 50-day moving average of $5.45 a share. The second and more important level is some overhead resistance at $5.70 to $5.76 a share. A move above those levels could bring in some momentum traders who love to play breakouts.

One could be a buyer of this breakout and simply place a mental stop at right around the 50-day moving average, which also is right around the top of an uptrend line that has been forming since late June. A move over $5.76 should set the stock up for a run towards $6.50 a share or possibly even higher into the mid-$7s. I would watch for a move over $5.76 that comes on heavy volume that's close to or greater than its three-month average action of 469,000 shares.

It's worth noting that this is one heavily shorted stock by the bears. The current short interest as a percentage of the float for LLEN is an extremely large 19.7%. Traders should eye this name for a move above $5.76 a share, because it could spark a huge short squeeze for the stock in the coming days or weeks.

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