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5 Stocks Poised for Breakouts

Rare Element Resources

My final idea today that could be ready to trigger a major breakout trade is Rare Element Resources (REE), which is engaged in the acquisition, exploration and development of mineral properties. This stock is off to a hot start so far in 2012, with shares up over 50%.

If you look at the chart for Rare Element Resources, you'll see that this stock has just started to bounce strong off its 50-day moving average of $4.30 a share with decent upside volume. That move is quickly pushing REE within range of taking out its 200-day moving average at $5.04 a share, and then possibly taking out some more overhead resistance levels. If those resistance levels are cleared with decent volume, then REE will trigger a major breakout trade.

Traders should now look for long-biased trades in REE once it manages to clear some near-term overhead resistance levels at $5.04 to $5.50 a share with high volume. Look for volume off that move that hits near or above its three-month average action of 462,603 shares. If that breakout triggers soon, then REE will setup to re-test or possibly take out its next major overhead resistance levels at $6 to around $7 a share.

One could look to get long REE off weakness, and simply use a stop just below its 50-day moving average of $4.30 a share. You could also just buy off strength once REE clears $5.04 to $5.50 a share with high volume, and then simply use a stop at around its $4.75 to $4.50 a share.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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SYM TRADE IT LAST %CHG
ZGNX $13.35 2.46%
AXU $0.32 -7.97%
IDIX $24.50 0.20%
SPPI $7.15 1.56%
REE $0.40 0.00%

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DOW 17,776.91 +93.33 0.53%
S&P 500 2,081.34 +12.58 0.61%
NASDAQ 4,997.4590 +5.5190 0.11%

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