One stock that's trading very close to triggering a major breakout trade is
(SKUL - Get Report)
, which develops and distributes headphones and other audio accessories to retailers throughout the U.S. and to distributors in various countries worldwide. This stock is off to a decent start in 2012, with shares up over 18%.
If you take a look at the chart for Skullcandy, you'll see that this stock pulled back and tagged its 50-day
of $13.49 about three times during the last couple of weeks. Each time that SKUL tagged its 50-day, the stock was able to hold that key technical level. Now shares of SKUL have started to move back above its 200-day moving average of $14.54 a share, which is a level the stock has struggled to trend above for the past two months and change. If SKUL can maintain a trend above its 200-day moving average, then the stock will setup to trigger a major near-term breakout trade.
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Market players should now look for long-biased traders in SKUL if it can manage to
trigger a breakout
above some near-term overhead resistance at $15.02 to $15.40 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 472,135 shares. If we get that move soon, then this stock has the chance for a very explosive move that should send it soaring over its next significant overhead resistance levels at $16.80 to $17.76 a share, or possibly even above $19.75 a share.
One could look to buy shares of SKUL as long as this stock is holding a strong volume trend above its 200-day moving average of $14.54 a share. If you get long above the 200-day, then look to add into strength once SKUL clears $15.02 to $15.40 with high volume. I would use a stop either below yesterday's low of $14.05 or right below its 50-day moving average of $13.49 a share.
This stock has a major catalyst on the horizon since SKUL is set to report earnings on August 2 after the market close. The current short interest as a percentage of the float for SKUL is gigantic at over 70%. This massive short interest is the perfect storm for a monster short-squeeze in SKUL right into its earnings report, and possible after if the company can deliver strong numbers. This is also a stock with a ridiculously low float of just 15.08 million shares. That low float combined with the huge short interest could easily set off an explosive move if the bulls decide to get long ahead of earnings.