5 Stocks Setting Up to Break Out

Cytori Therapeutics

My final idea today for a near-term breakout trade is Cytori Therapeutics (CYTX), which is engaged in developing cell therapies to treat cardiovascular disease and repair soft tissue defects. This stock has been slammed by the sellers during the last six months, with shares off by 29%.

If you look at the chart for Cytori Therapeutics, you'll notice that this stock has just started to uptrend a bit after gapping down sharply last December from $3.60 to below $2.80 a share. During that uptrend over the last month, shares of CYTX have trended higher from its recent low of $2.46 to its high of $3.16 a share. That move has started to push shares of CYTX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in CYTX if it manages to break out above some near-term overhead resistance levels at $2.85 to $3.04 a share and then once it clears more resistance at $3.16 to $3.20 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 437,312 shares. If that breakout hits soon, then CYTX will set up to re-fill that previous gap down zone that started close to $3.60 a share. If that gap gets filled, then CYTX will have a chance to tag its next significant overhead resistance levels at $4 to $4.25 a share.

Traders can look to buy CYTX off any weakness to anticipate that breakout and then simply use a stop that sits just below some key near-term support at $2.65 a share. One could also buy CYTX off strength once it takes out those breakout levels with volume and then simply use the same stop near $2.65 a share.

This is another favorite target of the short-sellers, since the current short interest as a percentage of the float for CYTX is a large 17.2%. If that breakout triggers soon, then CYTX could easily get squeezed significantly higher as the bears rush to cover some of their bearish bets.

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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