Two stocks in the tobacco space have been consolidating around their rising 50-day moving averages for the last two months and look ready to break out to new all-time highs.

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The first is Reynolds American (RAI) , which pulled back off its October high to retest its 50-day average and began making higher lows under horizontal resistance in the $46.90 area. This narrowing of price range compressed Bollinger bandwidth to a level that is often followed by volatile moves, and the technical indicators are suggesting that such a move will be higher.

Moving average convergence/divergence has made a bullish crossover and is crossing above its center line, and the relative strength index is above both its 21-period average and center line. These readings reflect improving price momentum and short term trend direction.

Holiday volume has been light, as it has across the broader market, but the money flow index, a volume-weighted relative strength measure, is above its signal and center lines. The triangle pattern projects a target price that is measured by adding the height of the pattern to the breakout level, and this would take the stock  above the October high to a new all-time high.

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The second breakout candidate in the sector is Altria Group (MO) - Get Report , which is showing similar price action and technical indications. On this chart, the stock can be seen consolidating in a horizontal pattern around its rising 50-day moving average. The vortex indicator, which is designed to identify initial trend changes, has made a bullish crossover, as has moving average convergence/divergence, both signs of positive momentum and direction.

Accumulation/distribution crossed above its 21-period signal average, and Chaikin money flow, a 21-period average of accumulation/distribution, is above its center line, reflecting renewed buying interest.  A successful breakout from the channel pattern, like the previous rising triangle, projects to new highs.

Altria and Reynolds American are long candidates after upper candle closes above individual pattern resistance, utilizing trailing percentage stops.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.