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5 Stocks Setting Up to Break Out


Another stock that's trading within range of a major breakout trade is retail player Zumiez (ZUMZ - Get Report). This company is a specialty retailer of action-sports-related apparel, footwear, equipment and accessories operating under the Zumiez brand name. This stock is off to a strong start in 2012 with shares up around 35%.

If you take a look at the chart for Zumiez, you'll notice that this stock has been uptrending strong for the last six months, with shares soaring from $22.57 to a recent high of $38.99 a share. During that monster move to the upside, shares of Zumiez have consistently made higher lows and higher highs, which is bullish technical price action. That bullish trend for Zumiez has now pushed the stock within range of triggering a major breakout trade.

Market players should now look for long-biased traders in ZUMZ if it can manage to trigger a near-term breakout trade above some overhead resistance at $37.71 to $38.99 a share with high volume. Look for a sustained move or close above those levels with volume that registers close to or above its three-month average action of 417,069 shares. If we get that action soon, then ZUMZ will enter new 52-week high territory. That could easily push the stock north of $40 towards $50 a share very quickly.

I would look to play that breakout for ZUMZ if it hits once the stock clears $37.71 to $38.99 with high volume, and simply use a stop a few percentage points below that level. I would completely avoid any long trades on ZUMZ if it fails to trigger that move and then drops back below its 50-day moving average of $35.76 with heavy volume.
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