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.
One example of a successful breakout trade I flagged recently was banking player Doral Financial (DRL), which I featured in July 18's "5 Stocks Ready for Breakouts" at around $5.21 per share. I mentioned in that piece that shares of Doral Financial recently pulled back sharply from its high of $9.93 to its intraday low of $5.04 a share. Shares of DRL were just starting to find some buying interest around $5 a share, and that action was setting up DRL for a possible breakout if the stock could manage to take out some key near-term overhead resistance levels at $5.52 to $6.16 a share.
Guess what happened? Shares Doral Financial dipped lower again on July 22 to $4.61 a share, but then on July 23 this stock skyrocketed higher with heavy upside volume flows and triggered that breakout. Volume on that day registered 7.14 million shares, which is well above its three-month average action of 1.51 million shares. Shares of DRL tagged an intraday high on July 23 of $7.10 a share, which represents a monster gain of close to 40% from the price DRL was trading at the day I flagged it. As you can see, when breakouts trigger with high-volume stocks can make very explosive moves in short time frames.
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.