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.
One recent example of a successful breakout trade was biotechnology and drugs player
, which I
highlighted on Aug. 17
because it was uptrending strong with bullish volume flows. I pointed out how SPRT was holding its gains and was trending very close to taking out some near-term overhead resistance at $10.78 a share. I also mentioned that SRPT was holding key support at $10 to $9 a share.
Shares of SRPT never looked back after I wrote that piece. The stock went on to trigger that breakout above $10.78 with massive upside volume. The stock gapped up a number of times this week and hit an intraday high on Thursday of $15.18 a share. That's a monster gain in just two weeks from my call. The best part about SRPT is that you had price and volume conformation on the breakout, which raised the probability of it being a successful trade.
In fact, I even
about SRPT and how it was setting up bullishly for a major breakout after I wrote that piece. Tweeting about high-probability trading setups, breakout candidates and trend trading in general is something that I do frequently and passionately.
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
One name in the health care facilities complex that's trending within range of triggering a near-term breakout trade is
, a provider of fixed-site laser vision correction services at its LasikPlus vision centers.
If you take a look at the chart for LCA-Vision, you'll see that this stock has been downtrending badly since it formed a double top back in April at around $7.50 a share. Following that double top, shares of LCAV had just one powerful bounce from $4.28 to $6.19, but shares went on to trend lower after that move and eventually tag a recent low of $3.49 a share. That said, shares of LCAV have now entered a sideways trading pattern for the last month and change between $3.49 and $4.09 a share.
On Thursday, LCAV saw a massive volume expansion after the stock closed up 8% to $4.02 a share with volume of 610,000 shares. That volume spike was dramatically higher than LCAV's three-month average action of 76,923 shares. That move also pushed LCAV within range of triggering a major breakout trade, and it spiked the stock back above its 50-day moving average of $3.87 a share. That powerful move and volume could be signaling that LCAV is ready to explode much higher.
Traders should now look for long-biased trades in LCAV once it manages to break out above some near-term overhead resistance levels at $3.96 to $4.09 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 76,923 shares. If that breakout triggers soon, then LCAV will have a great chance to re-test and possibly take out its next major overhead resistance levels at $4.60 to $5.11 a share. If that huge volume on Thursday is any indicator, then LCAV could easily hit $6 to $7 a share once it clears its 200-day moving average at $5.11 with volume.
One could look to buy LCAV off any weakness and simply anticipate that breakout, with a stop just below $3.50 a share. One could also just buy off strength once LCAV clears $4.09 a share with decent volume. And then use a stop either below Thursday's low of $3.62 or just below $3.50 a share.
Another stock that looks ready to trigger a major breakout trade is
, a provider of high-speed analog semiconductor solutions for the communications and computing markets.
If you take a look at the chart for Inphi, you'll notice that this stock has been uptrending very strong for the last three months and change, with shares soaring from a $7.99 to its recent high of $11.93 a share. During that uptrend, shares of IPHI have been consistently making higher lows and higher highs, which is bullish technical price action. That bullish move has now pushed IPHI within range of triggering a major breakout trade.
Market players should now look for long-biased trades in IPHI if this stock can manage to take out some near-term overhead resistance levels at $11.93 to $12 a share with high volume. Look for a sustained move or close above those levels with volume that tracks in close to or above its three-month average action of 236,484 shares. If that breakout hits soon, then IPHI will have an excellent chance of re-filling a previous gap and possibly trending up towards $13.50 to $14.80 a share.
One can look to buy IPHI off any weakness and anticipate that breakout, and simply use a stop that sits just below $10.50 a share or below its 50-day moving average of $10.15 a share. One could also buy off strength once IPHI takes out $12 a share with volume and moves into that gap down zone from back in April. If you buy off strength, then look to use a stop that sits just below its 200-day moving average of $11.61 a share, or even down near $11 a share.
A stock in the biotechnology and drugs complex that's trading within range of triggering a near-term breakout trade is
, which is developing a pipeline of drug candidates that utilize its PEGylation and advanced polymer conjugate technology platforms.
If you look at the chart for Nektar Therapeutics, you'll see that this stock made a monster move higher from its June low of $6.40 a share to its July high of $9.94 a share. Following that explosive move higher, shares of NKTR pulled back and entered a sideways trading pattern between $7.86 and $8.73 a share. Traders should now watch NKTR for a high-volume move outside of that sideways trading pattern, since that could trigger a powerful breakout trade.
Market players should now look for long-biased trades in NKTR if it can manage to trigger a move above some near-term overhead resistance at $8.73 a share with high volume. Look for a sustained move or close above $8.73 a share with volume that hits near or above its three-month average action of 926,631 shares. If that breakout triggers soon, then NKTR could easily tag or take out its July high of $9.94 a share.
One could look to buy NKTR off weakness and anticipate that breakout, with a stop that sits just below $7.86 a share. Or, one could buy off strength once NKTR clears $8.73 with high volume, and then use a stop just below its 50-day at $8.45 or below $8 a share.
Keep in mind that NKTR is a favorite target of the short-sellers. The current short interest as a percentage of the float for NKTR is very high at 15.5%. If that breakout triggers soon, then we could see a large short squeeze develop, so keep NKTR on your breakout trading radar.
Another stock in the biotechnology and drugs complex that's trading close to triggering a near-term breakout is
, which is focused on developing and commercializing of treatments for central nervous system disease based on transplanting human neural stem cells and small molecule drugs.
If you look at the chart for Neuralstem, you'll see that this stock recently formed a triple top at around $1.01, $1 and 99 cents per share. Following that topping pattern, shares of CUR plunged to its recent low of 42 cents per share. During that sharp move lower, shares of CUR were consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to uptick strong and see some massive upside volume flows. The recent bullish trend for CUR has also started to push the stock within range of triggering a major breakout trade.
Traders should now look for long-biased trades in CUR if it can manage to break out above some near-term overhead resistance at 58 cents per share with high volume. Look for a sustained move or close above 58 cents per share with volume that registers near or above its three-month average action of 132,434 shares. If that breakout triggers soon, then CUR could explode to the upside and potentially re-fill a previous gap that started above 65 cents. In fact, if CUR breaks out soon with volume, then this stock could hit 80 to 90 cents per share very quickly.
One could look to buy CUR off weakness and simply use a stop that sits just below some near-term support at 50 cents per share. Or you could buy off strength once CUR clears 58 cents per share with volume and gets into that gap down zone from earlier this month. If you buy off strength, then use a stop that also sits just below 50 cents per share.
My final breakout trade idea today is
, a biopharmaceutical company that applies its Precision Targeted Immunotherapy Platform to generate a pipeline of candidates to treat cancer and other difficult-to-treat diseases.
If you look at the chart for Celldex Therapeutics, you'll see that this stock has been uptrending strong for the last six months, with shares trending higher from $3.54 to $5.72 a share. During that uptrend, shares of CLDX have based and then broken out two significant times; including just recently with the stock pushing back above its 50-day moving average of $5.09 a share. The most recent base and breakout has now pushed CLDX within range of taking out its 52-week high of $5.72 a share.
Traders should now look for long-biased trades in CLDX once it manages to clear some near-term overhead resistance levels at $5.56 to $5.72 a share with high volume. Look for volume off that move that hits near or above its three-month average action of 786,562 shares. If that breakout triggers soon, then CLDX has a great chance to re-test or possibly take out its next major overhead resistance level at $7 a share. That breakout would also push CLDX into a previous gap down zone from back in 2012.
One could look to get long CLDX off weakness, and simply use a stop just below its 50-day moving average of $5.09 a share. You could also just buy off strength once CLDX takes out $5.66 to $5.72 a share with high volume. If you buy off strength, you could use the same stop below the 50-day, or something much tighter depending on the size of your trade.
Keep in mind that CLDX is another name that's popular among the short-sellers. The current short interest as a percentage of the float for CLDX is rather high at 11%. If CLDX can print a new 52-week high soon, then those shorts could get spooked and start cover some of their positions, which will potentially spike CLDX significantly higher.
To see more breakout candidates, check out the
portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
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At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
, and has been featured in
Investor's Business Daily
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.