5 Stocks Setting Up to Break Out

U.S. stocks are trending slightly lower today after official government data showed that the U.S. economy grew more slowly than originally expected in the third quarter. That slower growth was mostly due to corporations drawing down their inventories faster than expected.

Gross domestic product was revised lower to an annual rate of 2% in the third quarter from a previous estimate of 2.5%, according to the commerce department. Although this number is below most economists' estimates, it's still better than the second quarter's anemic growth of just 1.3%.

At last check, the Dow Jones Industrial Average was trading down 40 points and the S&P 500 was off by 3 points. The tech-heavy Nasdaq was sliding lower by 6 points. If large institutional traders decide to use the recent weakness in equities as a buying opportunity for an end-of-the-year rally, then a number of stocks are going to break out and trend significantly higher. The top traders in the world know that markets are made up of thousands of stocks in different sectors. With so many moving parts, there's always some sector or stock that's acting strong and breaking out.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels, and hold above those breakout prices, then it can easily trend significantly higher.

Here's a look at a number of stocks that are setting up to break out and potentially trade higher from current levels.

Cheniere Energy

One stock that's setting up beautifully for a big breakout is Cheniere Energy(LNG), an energy company primarily engaged in LNG-related businesses. This stock has been a market leading performer in 2011, with shares up a whopping 110%.

If you take a look at the chart for Cheniere Energy, you'll notice that for the past month this stock has been setting up a solid basing pattern at around $10 a share, after the stock gapped up on huge volume through its 50-day and 200-day moving averages. Now this stock has triggered a breakout intraday after it moved above some past overhead resistance level at $12.56 and hit a daily high of $12.86. So far this breakout has failed, and the stock has traded back to near $11.50.

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