MADISON, Wis. ( 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.
One example of a successful breakout trade I flagged recently was electric car maker Tesla Motors ( TSLA), which I featured in last week's " 5 Stocks Poised for Breakouts" at around $95 a share. I mentioned in that piece that shares of TSLA had recently pulled back from its high of $97.12 a share to just under $85 a share with lighter volume. The stock was quickly rebounding off that $85 low and it was starting to break out above some near-term overhead resistance at $95 a share. That move was quickly pushing shares of TSLA within range of triggering a near-term breakout trade above some key resistance levels at $96 to its all-time high at $97.12 a share.
Guess what happened? Shares of TSLA flirted with that breakout the same day my article posted, when the stock hit an intraday high of $97.95 and closed at $97.08 a share. Then on Tuesday, shares of TSLA exploded higher and entered new all-time high territory, with the stock hitting an intraday high of $110.75 a share. This stock continued to trend higher on Wednesday, hitting a new all-time high of $114.90 a share. That represents a gain of 20% in just a few days for anyone who played the breakout. Shares of TSLA will now need to take out $114.90 a share with volume to have a chance at trending north of $120 a share. The key support level to focus on now is $100 a share.>>5 Big Stocks to Sell Now 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. 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. >>Warren Buffett's 5 Favorite Stocks for 2013