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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Stocks Setting Up to Break Out

Venaxis

My final breakout trading candidate is Venaxis (APPY), which advances products that address unmet human diagnostic needs. This stock has been hit hard by the bears so far in 2013, with shares down by 48%.

>>5 Rocket Stocks to Buy for Earnings Season

If you look at the chart for Venaxis, you'll notice that this stock has started to consolidate and trend sideways after a major downtrend from February to late May, with the stock now moving between $1.15 on the downside and $1.45 on the upside. Shares of APPY have just started to uptrend over the last few weeks, with shares moving higher from its low of $1.17 to its recent high of $1.41 a share. That move is quickly pushing shares of APPY with range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in APPY if it manages to break out above some near-term overhead resistance levels at $1.41 to $1.45 a share with high volume. That breakout, if triggered, would also push APPY back above its 50-day at $1.44 a share. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 749,656 shares. If that breakout triggers soon, then APPY will set up to re-test or possibly take out its next major overhead resistance levels at $1.70 to $1.80 a share. Any high-volume move above those levels will then give APPY a chance to tag its next major overhead resistance levels at $1.94 to its 200-day at $2.08 a share.

Traders can look to buy APPY off any weakness to anticipate that breakout and simply use a stop that sits right below either of its key near-term support levels at $1.20 or $1.15 a share. One could also buy APPY off strength once it clears those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

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

-- Written by Roberto Pedone in Delafield, Wis.

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

Roberto Pedone, based out of Delafield, Wis., 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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