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TheStreet Open House

5 Stocks Poised for Breakouts

Stocks in this article: SRPTNFLXCPRXGMCRSNSSGTIV

Netflix

Another stock that looks poised to trigger a major breakout trade is Internet TV broadcasting player Netflix (NFLX), which provides Internet subscription services for TV shows and movies in the U.S. and internationally. This stock has been smashed by the short-sellers during the last six months, with shares down by a whopping 45%.

If you look at the chart for Netflix, you'll notice that this stock recently ran into heavy resistance at around $85 to $86.50 a share in July. After failing to clear those resistance levels, shares of NFLX plunged and gapped down from over $80 to below $60 a share with monster selling volume. Following that gap down, shares of NFLX went on to make a new low of $52.81 a share. That said, shares of NFLX have now started to rebound sharply with the stock trading at around $63 a share. That rebound has pushed NFLX within range of triggering a major breakout trade.

>>4 Stocks That Could Burn Short-Sellers

Traders should now look for long-biased traders in NFLX if this stock can manage to take out its gap down day high of $66.80 a share from back in July with high volume. Look for a sustained move or close above $66.80 with volume that registers near or above its three-month average action of 4,858,760 shares. If that breakout triggers soon, then look for NFLX to rip higher as it attempts to re-fill some of that previous gap. This stock could easily trend north of $70 a share if that breakout triggers soon.

Since this is simply a breakout trade for a play off a move into that gap, I wouldn't give this very much room to the downside if you buy off weakness. If you get long off weakness, simply use a stop at around Thursday's low of $62.80 a share. I would rather get long off strength once NFLX clears $66.80 with high volume, and then simply use a stop at $65 to $64 a share.

This is another favorite target of the bears on Wall Street. The current short interest as a percentage of the float for NFLX is extremely high at 28.6%. The bears have also been increasing their bets from the last reporting period by 23.6%, or by about 2.94 million shares. Look for some short-covering to hit NFLX if this stock can get into that gap from back in July.

For another take on Netflix, it shows up on a list of 6 Sucker Stocks to Avoid at All Costs.

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