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TheStreet Open House

5 Stocks Setting Up to Break Out

WINDERMERE, Fla. ( Stockpickr) -- Stocks continued their upward swing on Friday as the market continued to shake off bad news and defy the bears.

The Dow Jones Industrial Average closed higher by 56.68 points at 12,341.83, and the S&P 500 closed up by close to 5.16 points to 1319.65. The tech-heavy Nasdaq also finished higher, by 4.43 points, at 2764.65

It seems that no matter what is thrown at this market, including disappointing earnings out of search king Google (GOOG) and banking giant Bank of America (BAC), equities continue to power higher. This has to be madly frustrating to the bears, but as always, it's a lesson in why it pays to stick with the trend, or the path of least resistance.

To be fair, the market still hasn't broken out above some key technical resistance areas, but it's very close to doing so, and the trend remains up.

The breakout level to watch for on the Dow Jones Industrial Average is above 12,450.93 and on the S&P 500 is 1339.46 to 1344.07. On the Nasdaq, it's 2815.55 to 2840.51. The Nasdaq remains the weakest of the three major U.S. indices, and the action in Google on Friday wasn't helping matters after the stock finished down by 47 points, or about 8.2%.

Related: Beaten-Down Tech Stocks Set to Bounce

It's very important that traders watch how all three major indices behave in the next couple of days and weeks. It would be very bullish to see a weekly close on at least the Dow and S&P 500 that's above those levels I mentioned. The Nasdaq probably has more work to do before it can attempt to break out, so don't key off that index for now. If we do trade to new highs, then we're going to see tons of stocks following the averages and breaking out as well.

Trading breakouts is not a new game on Wall Street. This strategy has been by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. With that in mind, here's a look at a number of stocks that look poised to break out and trade significantly higher from current levels.

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