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TheStreet Open House

5 Stocks Poised for Breakouts

Knight Capital Group

A stock in the investment services complex that's trending within range of triggering a near-term breakout trade is Knight Capital Group (KCG), a global financial services firm that provides access to the capital markets across multiple asset classes to a network of clients, including buy- and sell-side firms and corporations. This stock has been hammered by the bears so far in 2012, with shares down by over 75%.

If you look at the chart for Knight Capital Group, you'll notice that this stock plunged and gapped down huge earlier this month from around $10.50 to its recent low of $2.27 a share with massive volume. That crash has pushed KCG into extremely oversold territory, since its current relative strength index reading is now 20.88. Following that crash, shares of KCG have now started to uptrend a bit with the stock making lower highs from $2.27 to $2.75 a share. If that pattern can hold, then KCG has a chance of triggering a near-term breakout trade.

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Traders should now look for long-biased trades in KCG if it can manage to trigger a near-term breakout trade above overhead resistance levels at $3 to $3.12 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 9,814,250 shares. If that breakout triggers soon, then KCG has a great chance of re-testing its next major overhead resistance level at $4.25 a share, and it could possibly get into that previous gap down above $4.32 a share.

One could look to buy KCG off weakness and simply anticipate that breakout. I would probably use a stop at around $2.75 to $2.68 a share, since those levels will need to hold to maintain the higher low pattern. It might be a better idea to just buy off strength once KCG takes out $3 to $3.12 with high volume. I would use the same stop if you get long KCG off strength. I would add to either position once this stock trades above its gap down day high of $4.32 a share with volume.

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