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TheStreet Open House

5 Stocks Ready to Break Out


A stock in the metal mining complex that's moving within range of triggering a near-term breakout trade is Molycorp (MCP), a rare earth oxide producer in the Western Hemisphere that owns fully developed rare earth project outside of China. This stock has been trending down so far in 2012, with shares off by over 50%.

>>5 Takeover Targets to Buy Before Wall Street Finds Out

If you look at the chart for Molycorp, you'll notice that this stock has been trending sideways for the last month, with shares moving between $10.25 on the downside and $11.89 on the upside. This stock has just started to push back above its 50-day moving average of $11.43 a share, and it's now quickly moving within distance of breaking out above the high-end of its recent trading range.

Market players should now look for long-biased trades in MCP if it can manage to break out above some near-term overhead resistance at $11.89 a share with high volume. Look for a sustained move or close above $11.89 a share with volume that registers near or above its three-month average action of 7,795,160 shares. If that breakout triggers soon, then MCP will setup to re-test or possibly take out its next major overhead resistance levels at $14.44 to $16 a share.

One can look to buy MCP off any weakness to anticipate that breakout, and then simply use a stop that sits just below its 50-day moving average of $11.43 a share. You could also use a stop down around $10.36, but I would rather see MCP trending above its 50-day to play this potential breakout.

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