5 Stocks Setting Up to Break Out

AuRico Gold

If you're looking for a breakout trade in the gold and silver sector, then take a look at AuRico Gold (AUQ), a mining company that is also engaged in the exploration for and development of gold and silver deposits in Mexico. This stock is off to a hot start in 2011, with shares up over 37%. Much of that strength is due to the strong action we have seen in the underlying commodity known as gold, which is up over 30% so far in this year.

If you take a look at the chart for AuRico Gold, you'll see that this stock is quickly approaching a big breakout if it can manage to trade and close above some past overhead resistance at around $13.60 a share. Earlier in today's trading session, the stock hit $13.70 a share, so now traders should watch for a closing price in the coming days or weeks above that level on big volume. I would suggest looking for volume that's close to or well above its three-month average action of 1.76 million shares.

One could be a buyer of this stock for a breakout trade once you see that close with volume above $13.70 a share. This stock's all-time high is just over $18 a share, so if we get the breakout, then this stock could trade up to those levels easily from here. I would simply use a mental stop just below $13.70 in case the breakout fails, so you're protected against a sharp pullback.

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