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5 Stocks Setting Up to Break Out

BALTIMORE (Stockpickr) -- U.S. stocks are trading nicely to the upside today after a big drop in the jobless rate spurred buying among bullish investors and short-covering among bearish market players.

The U.S. economy added 120,000 jobs in November, and the unemployment rate dropped to 8.6%, its lowest level in more than two and a half years, according to the Labor Department. Some market observers were attributing the drop to a pickup in hiring among private employers. That said, the number of new jobs created still fell well short of what economists say is needed to drive down our jobless rate, which is 250,000 jobs a month. We need that many jobs on average to get our unemployment rate back towards its pre-recession level near 6%.

>>5 Big Stocks to Trade for Gains Into 2012

At last check, the Dow Jones Industrial Average was trading up 25 points, and the S&P 500 had added 4 points. The tech-heavy Nasdaq was tacking on 8 points.

If the bulls continue to control this market, then we're going to see yet another end-of-the-year market rally. If we get that action, then you can expect to see a number of stocks and sectors breakout and trend significantly higher. 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 breaking out.

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.

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

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