Key Energy Services

Another stock that's trending very close to triggering a major breakout trade is Key Energy Services ( KEG), which provides a range of well services to oil companies, including rig-based well maintenance, workover, well completion and recompletion services, fluid management services, pressure pumping services, fishing and rental services. This stock has been a favorite target of the sellers so far in 2012, with shares down by over 50%.

If you look at the chart for Key Energy Services, you'll see that this stock recently sold off hard from a high of $9.57 to its recent low of $6.64 a share. During that selloff, shares of KEG were making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of KEG have now stabilized and started to trend higher with the stock moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in KEG if it can manage to break out above its gap down day high from late September at around $7.50 a share, and then above its 50-day at $7.92 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 volume of 3.4 million shares. If that breakout triggers soon, then KEG will setup to re-test or possibly take out its next major overhead resistance levels at $9.57 to $10.80 a share. If KEG can clear those levels with volume, then it will setup to challenge its 200-day moving average of $11.28 a share.

Traders should look to buy KEG once it takes out $7.50 to $7.92 a share with volume, and then simply use a stop that sits just below $7 a share.

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