WINDERMERE, Fla. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.
Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.
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.With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels. Forum Energy Technologies One name that's just starting to trigger a near-term breakout trade is Forum Energy Technologies (FET), which is a global oilfield products company, serving the subsea, drilling, completion, production and process sectors of the oil and natural gas industry. This stock has been moving modestly higher so far in 2012, with shares up around 9.8%. If you take a look at the chart for Forum Energy Technologies, you'll see that this stock has been trending sideways for the last month and change, with shares moving between $21.03 on the downside and $23.62 on the upside. This stock has just started to push back above its 50-day moving average of $23.35 and it's now starting to trigger a near-term breakout trade. That trade is setting up as FET pushes above the upper-end of its recent range today with shares now above $23.62. Traders should now look for long-biased trades in FET once it manages to break out above some near-term overhead resistance at $23.35 to $23.62 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 333,551 shares. That breakout is just starting to get underway, so traders should now look for FET to maintain that move with decent volume flows. If this breakout holds, then FET will set up to re-test or possibly take out its next significant overhead resistance level at $25.78. Keep in mind that $25.78 is the all-time high for FET, so any move above that level should be considered bullish technical price action. Traders can look to buy FET off any weakness and simply use a stop that sits just below its 50-day moving average of $23.35 a share. I would add to any long positions once FET manages to take out $25.78 a share with high volume. It's worth mentioning that FET sports a pretty decent short interest. The current short interest as a percentage of the float for FET is rather high at 12.9%. We could easily see short-covering move into this stock if FET manages to take out its all-time high of $25.78 a share in the near future.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV