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5 Stocks to Trade for Breakout Gains

Stocks in this article: COH RL GOLD EWP FXE

Polo Ralph Lauren

That brings us to another apparel stock that's getting attention from Twitter this morning, Polo Ralph Lauren (RL). Back in February, positive earnings prompted RL to gap up dramatically - dramatically enough that shares have been stuck trading in a sideways consolidation channel ever since as traders weighed their next move in RL. But there's a trade to be made in that sideways price action.

Because of that trading range, RL is forming an if/then trade right now, a setup whose ultimate direction is dependent on which way RL exits its channel. Put more simply, if RL breaks out above $180 resistance, then traders have a buy signal. Otherwise, if shares of RL fall down below $170 support, then it becomes a short candidate.

Momentum, as measured by 14-day RSI, is pretty neutral right now, which only means that RL really isn't tipping its hand to us right now; typically, secondary indicators like momentum give some hint at which direction market participants are favoring. Waiting for the break to happen before taking a position in critical. After that, I'd recommend keeping a protective stop just on the other side of the 50-day moving average regardless of which way it happens.

Ralph Lauren, one of SAC Capital's holdings, shows up on a list of 8 Stocks Rising Fast on Rich People's Spending.

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