Trade These 4 Breakout Stocks

Strong performances in Monday's session and positive price and money flow indications have these four stocks positioned to move higher. 

Here's how to trade them.

Cavium Networks

Shares of semiconductor manufacturer Cavium Networks (CAVM) jumped 7.8% in Tuesday's session, breaking through the upper end of a three-month trading channel.

The stock had been consolidating between support in the $51 area and resistance at the $58.50 level since September, and penetration of  that resistance could have prompted some covering of the 17% short interest in the stock. The relative strength index is above its center line and 21-period average, and moving average convergence/divergence has made a bullish crossover and is above its center line. Chaikin money flow is well into positive territory and shows that the stock has been under accumulation for the last several weeks.

It is a long candidate after a pullback, using an initial stop under channel resistance-turned support.

AmTrust Financial Services

AmTrust Financial Services (AFSI) is a casualty and property insurance provider. Its stock price has been consolidating for the last month in a small channel pattern whose parameters are being reinforced by the 50- and 200-day moving averages.

A hammer candle formed in Tuesday's session just above the 50-day average and just under the channel resistance line. The relative strength index has crossed above its center line, the accumulation/distribution line moved above its signal average and Chaikin money flow has moved over its center line.

The stock is a buy after a break above channel resistance using a trailing percentage stop.

DCT Industrial Trust

DCT Industrial Trust (DCT) is a real estate investment trust investing that deals primarily in industrial properties. The stock has been making a series of lower highs and lower lows for the last three months, creating a declining channel pattern.

The low last month came at the intersection of the channel support line and the 200-day moving average, and the stock bounced back to the 50-day average and the upper channel border. Chaikin money flow has crossed above its center line and the price momentum indicators have moved above their center lines.

The stock is a buy after an upper candle close above resistance, using a trailing percentage stop.

LKQ

The price action over the last three months on the daily chart of automotive parts supplier LKQ (LKQ) has formed a cup and handle pattern with rim-line resistance in the $33.50 area.

The stock recently bounced off a small double bottom and closed Monday's session near the intersection of the declining 50-day moving average and the rising 200-day average. The price momentum indicators have been trending higher and are sitting on their center lines, and the Chaikin money flow indicator is positioned on its center line.

A break above rim-line resistance is a long entry point, using a trailing percentage stop.

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

More from Stocks

Dow Tumbles as Trump Ratchets Up China Trade Fight

Dow Tumbles as Trump Ratchets Up China Trade Fight

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

TheStreet's Top Columnists Take Your Questions on What Stocks to Buy

TheStreet's Top Columnists Take Your Questions on What Stocks to Buy

Is Tesla Really Being Sabotaged?

Is Tesla Really Being Sabotaged?

Beware of the Coming Economic Debt Bomb

Beware of the Coming Economic Debt Bomb