There are always themes underlying the stock market. Earlier in the year, it was biotechnology. Then oil services offered nice gains. 

When we can combine two themes, we can often multiply their benefits, and right now that is what I see with consumer staples stocks and Latin America.

At first glance, the consumer staples sector appears flat and is slightly lagging the broader market so far in 2015. But beneath the surface, the Consumer Staples Select Sector SPDR ETF (NYSE: XLP) is enjoying solid demand.

#-ad_banner-#The on-balance volume study, which keeps a running tally of volume traded on up days minus volume on down days, is rising. This is a proxy for money flow and is also an indication of supply and demand. When it is rising, we surmise bulls are more aggressive than bears and demand is beating supply.

Latin American stocks, as represented by the iShares Latin America 40 (NYSE: ILF), are also enjoying rising on-balance volume. Many emerging markets struggled last year as commodities tumbled, led lower by the precipitous decline in crude oil. However, ILF stabilized in December and has been moving sideways in a range since then. 

This month, ILF was finally able to move above its 50-day average and stay there for the first time in seven months. We cannot declare a new bullish trend just yet, but the technicals have indeed changed for the better with on-balance volume creating a bullish bias.

Sitting at this intersection of these two themes is Brazilian beer and soft drink company Ambev S.A. (NYSE: ABEV). Food and beverage companies are typically considered to be defensive in nature and less effected by economic ups and downs. 

On the chart, we can see that after a long decline ABEV found a price floor in December and tested it again in March. However, on-balance volume has been rising and is now at its highest since the 5-for-1 stock split that occurred in November 2013. 

The chart also shows a bullish-looking flag formation above the 50-day average and just below the trendline that guided shares lower since last year. 

In my experience, this sort of consolidation taking place at a trendline is a precursor for an upside breakout attempt. Such pauses allow the prior short-term trend to work off any excesses so that the breakout occurs with a sharp shift in market psychology to bullishness. In other words, it will be an organic breakout and not a momentum-driven one.

Here, the buy trigger is a move above the flag pattern, which is currently at $6.28 and falling at $0.10 every four days. But rather than get bogged down in pennies, it is more important to see vertical price action on at least average volume. Therefore, let’s err on the side of caution with a $6.30 round number trigger.

If successful, the first upside target would be $7, which is the 61.8% Fibonacci retracement of the April-to-December decline. This is slightly above resistance from the January high, but it makes sense as the continuation of the rally that began last month. In this case, it would make the short-term rallies before and after the flag pattern roughly equal. 

Ambev offers a 1.4% dividend yield based on its recent payouts. Unfortunately, it went ex-dividend in early March and its payment history has not been regular. So this should be treated as gravy rather than the sole reason for investing.

But for those of you who wish to generate income on ABEV or any other stock — regardless of whether the company pays a dividend — you can place the shares in a high-income brokerage account. 

A regular brokerage account doesn’t allow you to do anything more than simply buy and sell stocks. But if you hold your stocks in a high-income brokerage account, you can collect income each month — $1,200 or more in some cases. Most investors can easily convert their existing brokerage account with no hassles at all. To see if you’re eligible to open a high-income brokerage account, click here.

Recommended Trade Setup:

— Buy ABEV at $6.30
— Set stop-loss at $6.10
— Set initial price target at $7 for a potential 11% gain in six weeks

This article was originally published on ProfitableTrading.com: Under $7 Stock Just Pennies Away From a Breakout