This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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!

5 Stocks Setting Up to Break Out

Stocks in this article: GME QIHU ZAGG AUQ LLNW MOTR

GameStop

One stock that's quickly approaching a major breakout is GameStop (GME), a multichannel retailer of video game products and personal computer entertainment software. This stock hasn't done much so far in 2011, with shares off by around 4%.

The company reported a weak second quarter on Thursday, announcing that earnings fell 15.4% to 22 cents per share vs. 26 cents per share in the prior-year quarter. But GameStop told a good story about the future, saying that the holiday season should be strong due to hot games such as Call of Duty and Modern Warfare 3.

If you take a look at the chart for GameStop, you'll see that this stock has started to break out above a key descending trend line that started back in late June. This trend line has marked a big resistance level on the stock for the past two months, so now that the stock has started to trade above it, it could mean a major trend change is at hand.

Another major positive here for GameStop is that upside volume has started to pick up dramatically as the stock has run from $18.30 a share to its current price of just under $22. Volume yesterday was 14 million, and volume today has already clocked in at 5.2 million, which is well above its three-month average of 4.2 million.

One could be a buyer of this stock once it clears its 200-day moving average of $22.93 a share on solid volume. I would add to any long positions after it then trades above its 50-day moving average of $24.25 a share. I would use a mental stop just below $21 in case this stock isn't ready to start a new bullish trend change.

Keep in mind that this is a heavily shorted stock that could easily get squeezed dramatically higher from here if the bulls gain full control. The current short interest as a percentage of the float for GameStop is massive 25.1%. In fact, I included the stock this week on a list of earnings short-squeeze plays.

2 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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