Meritor

Another under-$10 stock that's starting to trigger a big breakout trade is Meritor ( MTOR). This company is engaged in providing drivetrain mobility and braking solutions for original equipment manufacturers of trucks, trailers and specialty vehicles, as well as the related aftermarkets in the transportation and industrial sectors. This stock is killing the shorts in 2012 with shares up over 40% so far on the year.

If you take a look at the chart for Meritor, you'll notice that this stock was in the control of the bears when it dropped from its October high of $10.31 to a recent low of $4.80 a share on monster volume. After that giant selloff, the stock has completely changed its trend and entered an uptrend with shares consistently making higher highs and higher lows, which is bullish price action. Now shares of MTOR are starting to trigger a big breakout on heavy volume.

Market players should keep an eye on MTOR for a sustained high-volume move and close above some near-term overhead resistance at $7.25 share. At last check, the stock has already trended above that level intraday, and the volume is tracking in very strong. Volume so far today is over 2.6 million shares, which is well above its three-month average action of 2.29 million shares. If this breakout is the real deal, then traders should target a move higher in MTOR back towards $8.50 to $10.28 (200-day) a share, or possibly much higher.

One could now be a buyer of MTOR off any noticeable weakness and simply use a mental stop that's a few percentage points below that breakout level of $7.25. You could also use a stop that's a bit lower at around today's low of $6.75 a share. If this breakout is the real deal, then getting long into some weakness should lead to some hefty profits in the near future.

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