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TheStreet Open House

5 Stocks Setting Up to Break Out


Another stock that's quickly approaching a big breakout is Lincare (LNCR), a provider of oxygen and other respiratory therapy services to patients in the home. This stock hasn't done much in 2011, with shares off by around 7%.

If you take a look at the chart for Lincare, one of the top-yielding health services stocks, you'll notice that this stock has been making higher lows since it bottomed in September around near $19.50 a share. Whenever any stock makes higher lows it demonstrates that large traders are paying up to own shares, which is bullish. Now shares of LNCR are starting to break out above some past overhead resistance at $24.51 a share.

If this breakout can hold, then LNCR is going to set up to test its 200-day moving average of $25.72.

Market players should now watch for LNCR to sustain a high-volume move and close above $24.50 and then $25.70 to trigger a much larger move higher. Look for volume on any move above those levels that registers near or above its three-month average action of about a million shares. If we get that action, then LNCR should setup to trend back toward $28 to $30 a share.

One could be a buyer of LNCR off any weakness and anticipate the breakout above $24.50 and $25.70 a share. At last check, the stock was trading at $24.78 so the first breakout level has already triggered. If you get long off weakness, I would simply use a mental stop a few percentage points below its 50-day moving average of $23.34.

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