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5 Stocks to Trade for Breakout Gains

VeriFone Systems

It's shaping up to be a stellar year for shares of payment solution firm VeriFone Systems (PAY - Get Report). Shares are up an astonishing 29.5% since the first trading day in January, a massive rally spurred by analyst views that new initiatives could dramatically spur earnings.

But the rally in VeriFone is starting to lose steam this week. That's what makes this stock's setup so attractive right now.

VeriFone had seen strong resistance at the $45 level back toward the end of 2011, but shares sunk like a stone in the fourth quarter on guidance that Wall Street didn't like. A turn to positive momentum at the start of this year pushed shares back up to that $45 level, but it wasn't until earlier this month that shares actually staged a breakout above that price. That breakout sent a buy signal to traders; so how does a decline look good?

A post-breakout decline, also called a throwback, is an opportunity for shares to test newfound support at that breakout level ($45 in PAY's case). Once shares bounce off of support, it's an opportunity for late traders to buy with limited downside risk. Waiting for that bounce is crucial -- support levels invariably fail, and we want confirmation of support in PAY before taking a position in shares.

VeriFone shows up on a list of 4 Stocks Set for Next-Gen Mobile Boost.
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