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TheStreet Open House

Breakout Stocks: Warner Chilcott, Alliance

By Roberto Pedone

WINDERMERE, Florida ( Stockpickr) -- Trading stocks that are breaking out can be a very profitable strategy if done right. That's because once a breakout occurs that isn't a rally, it can signal that a major fundamental change is occurring in a stock or in the entire stock market. A major fundamental change will usually create new trends, and new trends will cause breakouts that will have lasting power. For these reasons alone, investors should always be paying attention to which stocks and sectors are breaking out.

Trading breakouts is not a new game on Wall Street. This strategy has been pioneered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas

A breakout occurs when a stock makes a move through a significant level of support or resistance, which is usually followed by heavy volume and increased volatility. Wall Street players love to see an upside breakout because it demonstrates strength in the underlying asset as the price breaks above a level of previous resistance. An upside breakout can also take a stock to new highs, which will generate a lot of interest as the stock shows up on sophisticated software that scans for this type of action.

Here 's a look at a number of stocks that are already breaking out or could be setting up to become solid breakout stock plays

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