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5 Stocks Setting Up to Break Out


If you're looking for a market leader that could be setting up to breakout, then take a hard look at Zagg (ZAGG - Get Report). This company designs, manufactures and distributes protective coverings, audio accessories and power solutions for consumer electronic and hand-held devices under the brand names invisibleSHIELD, ZAGGaudio and ZAGGskins. This stock has been on fire in 2011, with shares up over 92%.

If you take a look at the chart for Zagg, you'll see that this stock recently hit some major overhead resistance at around $16.90 to $17.10 a share. Zagg has failed around this level a number of times during the past two months. That said, I still think the stock is worth putting on your breakout radar since the trend remains up for Zagg. It would now be constructive to see Zagg hold above its 50-day moving average of $14.22 a share -- or at least above $13.67 a share, which is a recent support zone.

As long as those levels hold, it might be a good idea to get long some shares of ZAGG on any weakness and anticipate a run back towards those resistance levels at around $17 a share. I would simply use a tight mental stop below $13.67 or around the 50-day moving average of $14.22. I would then add big to any long positions if you see Zagg take out $17.10 on heavy volume. Look for a breakout on volume that's either close to or well above its three-month average of 2.3 million shares.

This is a heavily shorted stock with over 74.1% of the tradable float sold short by the bears. If you see a Zagg breakout hit soon with volume, I would be all over this trade since the potential for a massive short squeeze is well within reason.
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LLNW $1.68 0.00%
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