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 who can ultimately push the stock significantly higher.
An example of a successful breakout trade I flagged recently was industrial goods player American Superconductor (AMSC), which I featured in July 11's "5 Stocks Ready for Breakouts" at around $1.65 per share. I mentioned in that piece that shares of American Superconductor were uptrending for the last two months and change, with shares moving higher from its low of $1.25 to its recent high of $1.78 a share. During that move, shares of AMSC had been consistently making higher lows and higher highs, which is bullish technical price action. That move was quickly pushing shares of AMSC within range of triggering a major breakout trade above its 200-day moving average of $1.70 to more resistance at $1.78 a share.
Guess what happened? Shares American Superconductor started to trigger that breakout on July 14 and on July 16 this stock exploded sharply to the upside with monster upside volume. Volume on that day registered 11.45 million shares, which is well above its three-month average action 975,000 shares. Shares of AMSC tagged an intraday high of $2.10 a share on July 16, which represents a monster gain of close to 30% in just a few trading sessions. As you can see, trading breakouts that trigger with volume and produce fantastic returns very quickly.
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.