Although we personally do not chase breakouts, we know that many of our readers do, so here's a freebee for you breakout fans. Advanced Battery Technologies, Inc. just broke out from a major consolidation pattern spanning almost three years.

The significance of this particular breakout, in addition to similar breakouts in other stocks we follow, portends a significant rally over the next few months. Of particular interest are "risky" stocks, such as ABAT. However, as we've stated in other missives, we do not wait for breakouts to build positions. We prefer to understand the underlying trends and fundamentals. We then buy the lows of assets that we've determined to be undervalued. From our perspective, ABAT was severely undervalued in the low 3 dollar range during the summer of 2010.

However, nothing is without risk, and the fact that ABAT's operations are mainly located in China may have pressed investors to stay away from the stock. Specifically, trade war fears may have suppressed the stock's performance, but now the market is telling the lemming traders to not be too fearful. We think the lemmings will listen and jump on board. Watch ABAT, as well as other stocks we've identified, make a major run in the next few months.

Holdings Disclaimer: Presently, John and Val do not have a position in ABAT.