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5 Stocks Setting Up to Break Out

Collective Brands

One stock that's already starting to break out is Collective Brands (PSS), which is engaged in the wholesale and retail of footwear and related accessories worldwide. This stock has been hammered by the bears so far in 2011, with shares off by around 30%.

If you take a look at the chart for Collective Brands, you'll notice that this stock has been stuck in a sideways trading pattern for the last month, between $12 a share on the lower end and $14.41 on the higher end. Now the stock is starting to break out above $14.41 a share, which could be signaling that a much bigger move higher is coming. The next major overhead resistance levels that traders should keep an eye on are at $15.40 to $16 a share. If this breakout holds, and then the stock takes out those levels, it could then make a run at filling the May gap down in price that started at around $19 a share.

>>20 Highest-Yielding Retail Stocks

You could buy this stock off any weakness and anticipate the move into the May gap down. You could simply place a mental stop just below $13.50 in case this is a false breakout. You could also just wait until $15.40 to $16 a share is taken out to the upside and buy off that strength. Look for a strong volume move above those levels that's tracking in close to or above its three-month average action of 2.2 million shares.

This is a heavily shorted stock, with over 32% of the tradable float sold short by the bears. If we see a breakout in PSS soon, then look for this big short interest to play a part in pushing this stock significantly higher from current levels.

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