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5 Stocks Setting Up to Break Out


Another stock that looks ready flash a big breakout is CNinsure (CISG - Get Report), an independent insurance intermediary company operating in China. The bears have destroyed this stock in 2011, with shares off by over 55%.

If you look at the chart for CNinsure, you'll notice this stock has been crushed lower by the bears from its July high of $15.92 a share to its current price of around $7.20 a share. The stock hit a low of around $5.80 to $5.90 a share in early October and has since then rebounded to its current levels. This stock is now triggering a breakout trade since shares have started to move above some big overhead resistance at $7 a share.

Traders should watch to see how the stock closes today and if large volume flows in that's well above its three-month average action of 524,700 shares. A sustained move above $7 a share should set this stock up to make a run at its 50-day moving average of $8.80 a share or possibly much higher.

One could simply be a buyer of this stock off any slight weakness now that it's started to take out $7 a share. I would simply use a mental stop just below $7 a share in case this breakout isn't the real deal.

It's worth mention that the current short interest as a percentage of the float for CISG is very large at just over 21%. This is a very large short interest on a stock with a tradable float of only 28.25 million shares. Now that this stock has started to move above that big overhead resistance at $7, look for a big short squeeze if the stock continues to push higher.

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CISG $7.81 0.00%
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