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TheStreet Open House

5 Stocks Poised for Breakouts

WINDERMERE, Fla. ( Stockpickr) -- 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.

An example of a recent successful breakout trade is biotechnology and drugs player Chelsea Therapeutics (CHTP), which I featured in Oct. 19's " 5 Stocks Ready to Break Out." The stock was in a clear sideways trading pattern, and it was finding buying interest each time it pulled back near its 50-day moving average. Shares of CHTP were starting to trend higher, and it was quickly moving within range of triggering a near-term breakout trade. That upside volume for CHTP was also starting to expand noticeably, which was another bullish technical sign.

>>5 Stocks Under $10 Set to Soar

Guess what happened? Within just a few days, CHTP went on to trigger that breakout trade with monster upside volume. The stock has skyrocketed in just a few days from a low of $1.25 to now over $1.90 a share. That's a gigantic gain in a very short time frame for anyone who was lucky enough to take the trade.

This is the power of breakout trading. When hit with volume, a stock will often make explosive moves. Shares of CHTP might still not be done going higher, since it could tag its next near-term overhead resistance levels at $1.99 to $2.11 a share, or possibly even $2.32 a share.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

>>4 Tech Stocks to Trade (or Not)

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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