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5 Stocks Setting Up to Break Out


One stock that's nearing a big breakout is Zogenix (ZGNX - Get Report), a specialty pharmaceutical company with two product candidates in late-stage development for the treatment of central nervous system disorders and pain. This stock has been hammered in 2011, with shares off by over 60%.

If you take a look at the chart for Zogenix, you'll see that this stock triggered a big breakout today once it moved above some near-term overhead resistance at $1.91 a share on monster volume. At last check, volume has registered over 1.7 million, which is well above its three-month average action of 240,417 shares. The stock is now nearing an even bigger breakout trade if it can manage to clear some more overhead resistance levels.

>>6 Stocks Under $10 Soaring Higher

Traders should now watch ZGNX for a move and close above $2.20 to $2.40 on solid volume in the coming days or weeks. Look for volume that's near or well above its three-month average action of 240,417 shares. If we get that action, then look for ZGNX to make a run at its 200-day moving average of $3.42 a share or possibly much higher.

You could be a buyer of ZGNX off any weakness and simply place a mental stop just a few percentage points below the breakout level of $1.91 a share. If you buy off of weakness, then I would add to any long positions once it takes out today's high of $2.40 with heavy volume.
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