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TheStreet Open House

Breakout Stock Charts: AutoZone, BanColombia

By Roberto Pedone

WINDERMERE, Fla. ( Stockpickr) -- To say the markets have been very difficult for the bulls during the past month would be quite the understatement. "Difficult" is putting it nicely. Due to a credit crisis in Greece and a "flash crash" scare that continues to defy explanation, the markets were absolutely hammered during May. The Dow Jones Industrial Average plunged 879.98 points, or 7.92%, for the month, marking the worst percentage drop in May since 1940, when shares fell 22%, and the worst May ever measured by points. That is a gigantic loss that even the most seasoned investor would have trouble stomaching.

Of course, if you've been short the markets during this time frame, then you've coined some cash. But for those who only like to go long stocks, one strategy that you can use in any market, bull or bear, is to look for stocks that are breaking out. A breakout chart pattern is simply a trend trading strategy which tries to isolate the strongest stocks in any market.

A breakout is when a stock makes a move through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Wall Street traders love to see a breakout because it demonstrates strength in the underlying asset as the price breaks above a level of previous resistance. A breakout can also take a stock to a new high that will generate a lot of interest as the stock shows up on Web sites and scanning software used by the most active investors and traders.

Let's take a look at the charts of this week's breakout stock plays. These stocks either are breaking out right now or could be setting up to attempt a big breakout in the near future.

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