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5 Stocks Poised for Breakouts

Zynga

One stock that's trending very close to triggering a near-term breakout trade is Zynga (ZNGA), which develops online games designed for play on social networking sites. This stock has been hammered by the bears during the last six months, with shares off by a whopping 53%.

If you take a look at the chart for Zynga, you'll notice that this stock has been uptrending modestly strong for the last two months, with shares rising from a low of $2.09 to its recent high of $2.73 a share. During that uptrend, shares of ZNGA have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of ZNGA have recently started to bounce right off its 50-day moving average of $2.34 a share and are quickly moving within range of triggering a near-term breakout trade.

>>5 Tech Sector Bargains to Buy in 2013

Traders should now look for long-biased trades in ZNGA if it manages to break out above some near-term overhead resistance at $2.73 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 20.2 million shares. If that breakout hits soon, then ZNGA will set up to re-test or possibly take out its next major overhead resistance levels at $3.27 to $3.40 a share. Any high-volume move above $3.40 will then give ZNGA a chance to re-fill its previous gap down zone from last July that started near $5.25 a share.

Traders can look to buy ZNGA off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.29 to $2.21 a share. One could also buy ZNGA off strength once it takes $2.73 a share with volume and then simply use a stop that sits just below its 50-day moving average of $2.34 a share. I would add to either position if ZNGA clears $3.27 to $3.40 with volume, since that will give the stock a chance to get into that gap from last July.

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