DELAFIELD, 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 biopharmaceutical player Idenix Pharmaceuticals ( IDIX), which I featured in July 18's " 5 Stocks Under $10 Set to Soar" at around $3.60 a share. I mentioned in that piece that shares of IDIX had recently gapped down sharply from $5.25 to $3.35 a share with heavy downside volume. Shares of IDIX went on to hit a low of $3.15 a share, but I was noticing that the stock was starting to rebound off that low and moving within range of triggering a major breakout trade. That trade was set to trigger if IDIX managed to take out some near-term overhead resistance at $3.72 a share and then once it cleared its gap down day high at $3.75 a share with strong volume.
Guess what happened? Shares of IDIX didn't wait long to trigger that move, since the stock started to break out on July 30 with strong upside volume flows. This stock continued to boom to the upside after breaking out, with shares hitting an intraday high on Thursday of $4.69 a share. That represents a gain of well over 30% since the time of my original article. You can see here how powerful breakout trading can be once key resistance levels are taken out with volume. I don't think this stock is done going up and it has a great chance to re-fill the rest of its gap back towards $5.20 to $5.50 a share in the near future.>>5 Huge Stocks to Trade for Gains 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. >>5 Stocks Spiking n Unusual Volume With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.