5 Breakout Stocks to Trade

Gran Tierra Energy

My final idea that's trending very close to breaking out is Gran Tierra Energy (GTE), which is an independent international energy company engaged in oil and gas acquisition, exploration, development and production. This stock is up modestly so far in 2012, with shares higher by 14%.

If you look at the chart for Gran Tierra Energy, you'll notice that this stock has been uptrending modestly for the last three months, with shares advancing from $4.23 to $5.75 a share. After hitting $5.75 a share, GTE has moved into a sideways trading pattern between $4.83 on the downside and $5.42 on the upside. This stock has just started to move back above both its 50-day at $5.09 and its 200-day at $5.29 with heavy upside volume. That move is also quickly pushing GTE within range of triggering a significant breakout trade.

Traders should now look for long-biased trades in GTE once it manages to take out some near-term overhead resistance levels at $5.42 to $5.75 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 volume of 527,406 shares. If that breakout triggers soon, then GTE will set up to re-test or possibly take out its next major overhead resistance levels at $6.40 to $6.70 a share. Any high-volume move above $6.65 would then put $7.27 to $7.70 into focus for GTE.

One could look to buy GTE off any weakness to anticipate that breakout and then simply use a stop right around its 50-day at $5.09 a share. Traders can also just buy off strength once GTE takes out those breakout levels with volume and then simply use a stop right below its 200-day at $5.29 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 technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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