One under-$10 name in the technology complex that looks to trigger a major breakout trade is
(VRNG - Get Report)
, a development-stage company engaged in developing software for mobile phones. This stock has been on fire so far this year, with shares up a whopping 300%.
Investors are starting to get very excited about the prospects for Vringo, which is suing
and a slew of other tech companies for patent infringement. If Vringo were to either win its lawsuit outright or just get these companies to settle pretrial for large damages, then this stock could be tremendously undervalued at current levels. Some people in the markets think that Vringo could trade well north of $30 a share if it were to collect billions in damages.
If you take a look at the chart for Vringo, you'll notice that this stock has been in a monster uptrend for the last six months, with shares skyrocketing from a low of around $1 to a recent high of $5.45 a share. During that huge move to the upside, shares of Vringo have been consistently making higher lows and higher highs, which is bullish technical price action. After hitting that high of $5.45, VRNG has pulled back right to its 50-day
, and it has now started to uptrend again with big volume flows.
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During the last three trading sessions, the upside volume for Vringo has registered 7.4, 6.5 and 6.9 million shares, which is well above its three-month average of 1.7 million shares. In fact, almost all of the significant volume days during the last four months have been on up days for the stock. This tells me that large institutional traders are accumulating shares aggressively, since the price has continued higher with the volume.
Traders should now look for long-biased trades in VRNG if it can manage to
trigger a breakout trade
above some near-term overhead resistance at $4.25 to $4.50 a share with high volume. Look for volume on that breakout that hits near or above its three-month average volume of 1.7 million shares. If we get that action, then VRNG will have an awesome chance of re-testing and possibly taking out its recent high of $5.45 a share. In fact, if we get that take out of $5.45, then I think it's very possible to see this stock hit $10 to $15 in the near future.
If you're bullish on VRNG, then once could load up on this stock off weakness and simply use a stop right below its 50-day moving average of $3.68 a share. You could even use stops near $3.20 a share if you wanted to give it more room. A better strategy might be to just buy off strength once VRNG clears and closes above $4.25 to $4.50 a share with strong volume. This stock is a favorite target of the short-sellers. The current short interest as a percentage of the float for VRNG is a whopping 32%. The bears have also been increasing their bets from the last reporting period by 32.2%, or by about 928,000 shares. If a high-volume breakout for VRNG triggers soon, then we could easily see an epic short-squeeze develop since the bears are swarming all over this stock. Be ready for it.