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5 Stocks Setting Up to Break Out

NEW YORK ( TheStreet) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high, or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players that can ultimately push the stock significantly higher.

A perfect example of a successful breakout recently was Digital Generation (DGIT). Last Wednesday, I noticed that this stock was trending up strong with above average volume. In my 4 stocks under $10 making big moves article, I flagged the stock for its strong action and highlighted the key price points that would trigger a near-term breakout trade.

>>Also see: 7 Stocks Ripping Higher on Spiked Volume

Guess what happened? Shares of Digital Generation triggered that breakout five days later once the stock took out some near-term overhead resistance at around $10 a share. The stock subsequently skyrocketed to high of $13.20 a share. That's a 30% return in just a few days, all because the stock broke out with heavy volume.

>>ACTIVE STOCK TRADERS: Check out Stockpickr's special offer for Real Money, headlined by Jim Cramer, now!

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.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

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