Stock Quotes in this Article: FLO, PCLN, PRKR, SEIC

 MILWAUKEE (Stockpickr) -- When trading, it is important to look for favorable risk/reward setups. One favorable setup I look for is the breakout. This setup is a favorite of mine because the amount of capital being risked is little compared with the potential reward from a strong breakout.

A breakout occurs when a stock takes out an area of resistance where sellers previous held the stock from moving higher. By breaking out of resistance, a stock can gather momentum as a new round of buyers and traders push the stock higher. After a strong breakout, the broken resistance level then becomes a support level where new buyers come in, holding the stock up.

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With this in mind, here are a few stocks near breakout levels.


My first breakout candidate is Parkervision (PRKR). A potential entry for the breakout is around the $4.25 resistance area. Break that and the next resistance level is $4.39 and $4.50, which was the high set during a run way back in October 2009.

Sei Investments

My second breakout candidate is Sei Investments (SEIC). This stock has struggled to get past the lower $29 area. The stock found support near the $27.50 area and has been bouncing around here and $29 over the past two months. A potential entry for this breakout is the high set at $29.23.

A nice rule of thumb for a target objective on a breakout is to look at the depth of the pattern. The support area during this consolidation period was $27.50 with resistance in the $29 area. That's a rough $1.50 difference which can be used as a target objective on a breakout. Add the difference to the breakout point and this gives us a rough breakout target of near $31.

Flowers Food

My third breakout candidate is Flowers Food (FLO). This stock has struggled to pass the lower $33 area. Previous strong breakouts had this stock running multiple days and occurred on volume over 750,000. A potential entry is the break of highs at $33.25. Ideally, this breakout will see volume over 750,000 again for the day, in which case I would gladly hold overnight.

As you can see from the chart where I circled, the past two nice breakouts had volume over 750,000. During these two multi day breakout runs, FLO roughly gained 10% each time. Seeing this, a potential target estimate for a breakout is 10%, which puts the stock roughly at $36.50.

Though 10% is possible, it is always nice to lock in some profits as anything can happen. A 5% gain from the $33.25 break is a possible area to take some profits in my opinion, which would put the stock at $34.90s.

My final breakout candidate is (PCLN). If you exclude the dot-com bubble prices, $775 is an all-time high level for Priceline and the stock is nearing this level again. With no resistance above this level, a break of this key level could be the start of a much bigger run. Given the larger spreads in PCLN, if you are looking to trade it, be sure to put an alert around $774 to be ready for a test of $775.

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While $775 is a potential buying point, so is any dips. As you can see from the chart, PCLN has ran up quite nicely already the past few days. A dip can possibly occur. If any dips occur, look for the strong up trend line as a potential area to get back in. This would put potential entries on dips near the $690 to $700 level. If you pick anything up in this area on a dip, a potential target is near the $760 level again, where you can unload some and hold some to see if a breakout occurs to new highs occurs. Stops for any dips can be put at slightly below $680 support or a price just below the trend line.

-- Written by Andrew Anger in Milwaukee.


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Andrew Anger, based out of Milwaukee, is a proprietary trader, focused on technical analysis in small- to large-cap stocks.  He graduated in 2012 from Saint Mary's University of Minnesota with degrees in marketing and entrepreneurship. You can follow him on twitter @angertrader.