My final breakout trading prospect is Potash (POT), an integrated fertilizer and related industrial and feed products company that owns and operates five potash mines in Saskatchewan and one in New Brunswick. This stock has been hit hard by the bears so far in 2013, with shares off sharply by 19%.
If you look at the chart for Potash, you'll notice that this stock gapped down sharply back in July from $38 to $29 with heavy downside volume. Following that gap down, shares of POT have formed a bottoming chart pattern as the stock has started to uptrend, with shares moving higher from its low of $28.55 to its recent high of $33.38 a share. Shares of POT have been flirting with its 50-day moving average today at $33.11 a share, and it's quickly moving within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in POT if it manages to break out above some near-term overhead resistance levels at Friday's high of $33.30 to some key overhead resistance at $33.38 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 action of 12.87 million shares. If that breakout triggers soon, then POT will set up to re-fill some of its previous gap down zone from July that started near $38 a share.Traders can look to buy POT off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $31.39 a share to $30 a share. One could also buy POT 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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