5 Stocks Setting Up to Break Out

WINDERMERE, Fla. (Stockpickr) -- U.S. stocks are ripping to the upside today, pushing the S&P 500 toward its biggest gain in over a month, after leaders in France and Germany announced plans to support European banks and get the region's debt crisis under control in three weeks.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said yesterday that they will introduce a "comprehensive package" to recapitalize European banks and address the Greek debt crisis by the Nov. 3 Group of 20 summit.

The bulls love this news, and it's clear that the bears have been forced to do some big short-covering, which has helped to gap the overall market significantly higher. Almost every single sector is trading to the upside, and many stocks are making massive spikes higher.

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For example, Coffee Holding (JVA), a stock I highlighted on last Thursday in "5 Stocks Under $10 With Big Upside Potential," has soared over 16% today. I am pointing this move out specifically to show how much a heavily shorted stock can spike in this kind of environment.

At last check, the Dow Jones Industrial Average was up over 270 points while the S&P 500 had added over 30 points. The tech-heavy Nasdaq was soaring by a whopping 75 points.

The top traders in the world know that markets are made up of thousands of stocks in different sectors. With so many moving parts, there's always some sector or stock that's acting strong and setting up to break out. 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.

Here's a look at a number of stocks that are setting up to break out and trade higher from current levels.

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