One stock that's trading within range of a major breakout trade is
(MRGE - Get Report)
, which develops software solutions that facilitate the sharing of images to create an electronic healthcare experience for patients and physicians. This stock has been hit hard by the sellers, with shares off by over 40% so far in 2012.
If you take a look at the chart for Merge Healthcare, you'll notice that this stock was taken to the woodshed by the bears, after it fell from its March high of $6.65 to a recent low of $2.20 a share. During that sharp move lower, shares of Merge Healthcare consistently made lower highs and lower lows, which is bearish technical price action. That said, this stock has started to form a bottoming process during the last two months at around $2.20 to $2.36 a share. This stock is also now moving within range of triggering a near-term breakout trade.
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Traders should look for long-biased traders in MRGE if it can manage to trigger a breakout above some near-term overhead resistance at $2.95 a share with
. Look for a sustained move or close above $2.95 with volume that registers near or above its three-month average action of 1 million shares. If we get that action soon, then MRGE could easily re-fill a previous gap-down from May and trade up toward $4 to $5 a share.
One could be a buyer of MRGE off weakness and anticipate the breakout with a stop at around $2.50 a share. I think a better idea is to buy MRGE off
and get long once it takes out $2.95 with volume. The best part about getting long above $2.95, is that it will also get you long above its 50-day
at $2.90 a share. I would also look to press this trade above $3.50 a share, since that's the daily high from the gap-down day in May.
Keep in mind that MRGE sports a pretty decent short interest. The current short interest as a percentage of the float for MRGE is 10.4%. If we get that breakout soon, then we could easily see a sizeable short squeeze develop.