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.
A perfect example of this is the move recently in biotechnology and drugs player
, which I flagged earlier this week in "
." When I saw ROSG trending higher that day, I pointed out that ROSG was close to taking out its 200-day
of $8.26 a share, and volume that day was tracking in extremely strong.
Well, guess what happened? Rosetta Genomics didn't just take out $8.26 a share with volume -- it went on to explode higher in just a few days and hit $23.43 a share. That's a ridiculous move on a stock that simply took out new highs and key overhead resistance levels with high volume. Moves like this happen all the time in the markets, so as traders and investors we constantly have to be scanning the markets for stocks that are setting up to break out and trend higher.
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 stock that's trading within range of a breakout trade is
, which develops, markets, sells and distributes alternative beverage. This stock is off to a hot start in 2012, with shares up over 60%.
If you take a look at the chart for Monster Beverage, you'll see that this stock has been trading in a perfect uptrend for the last six months. At the start of 2012, shares of Monster Beverage broke out above $49.18 a share, and they haven't looked back since. This stock has soared since it broke out over $49.18 to a recent high of $83.96 a share. During that move, shares of Monster Beverage have consistently made higher lows and higher highs, which is bullish technical price action. Also during that uptrend this stock has never once violated its 50-day or 200-day moving averages. Now the stock is trading very close to triggering a near-term breakout trade.
Market players should now look for long-biased traders in MNST if the stock can manage to trigger a break out above some near-term overhead
at $74.92 a share with high volume. Look for a sustained move or close above $74.92 with volume that registers near or above its three-month average action of 1.7 million shares. If we get that action soon, look for MNST to re-test its recent high of $83.96 a share or possibly trend much higher.
Look for confirmation of higher prices in MNST as long as its trending above $74.92 a share with strong upside volume flows. Some near-term support on the stock sits at $67.61 a share. This is a name I would be looking to play off strength once $74.92 is taken out with volume.
Another stock that's trading within range of a major breakout trade is biotechnology and drugs player
, which engages in the discovery and development of medicines for difficult-to-treat diseases. This stock is off to a strong start in 2012, with shares up over 40%.
If you take a look at the chart for Infinity Pharmaceuticals, you'll notice that this stock has been on a tear for the last four months after it broke out above $6.95 and then $10.18 a share. That first breakout over $6.95 came with huge volume and triggered a gap-fill in this stock back to $10.18 a share. Then the breakout over $10.18 came again with big volume and pushed the stock to a recent high of $13.75 a share. Since hitting that high, shares of Infinity Pharmaceuticals have pulled back below its 50-day
to a recent low of $11.76 a share. That said, on Thursday the stock recaptured its 50-dy and now looks poised to trend higher and trigger another breakout trade.
Market players should now look for long-biased traders in INFI if it can manage to trigger a near-term breakout trade above some overhead resistance at $13.00 to $13.75 a share with high-volume. Look for a sustained move or close above that level on volume that registers close to or above its three-month average action of 216,341 shares. If we get that action soon, then INFI should trade up towards $15 to $20 a share in the near future.
If you buy this stock off of weakness and anticipate that breakout, then I would simply use a stop just below its 50-day moving average of $12.44 a share. You can also play this off of strength and get long once it takes out $13 to $13.75 a share with strong volume, and simply use a stop just below $13 a share.
Keep in mind that this stock is heavily shorted since 17.6% of its 16.20 million share float is sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.4%, or by about 229,500 shares. If INFI can trigger that breakout trade soon, then we could easily see a sizable short-squeeze develop once the stock hits a new
above $13.75 a share.
Another name in the biotechnology and drugs complex that looks ready to trigger a major breakout trade is
, which is focused on serving patients with severe and ultra-rare disorders through the development and commercialization of life-transforming therapeutic products. This stock is off to a decent start in 2012, with shares up around 30%.
If you look at the chart for Alexion Pharmaceuticals, you'll see that this stock has been uptrending strong for most of 2012, with shares skyrocketing from a low of $62.50 to a high of $95.01 a share. That uptrend was briefly broken earlier this month when shares of Alexion moved back below its 50-day moving average of $90.04 a share, and traded to a recent low of $81.28 a share. Following that move, this stock was able to find buying interest around $81.28 to $82.95 a share, and since then it has moved back above its 50-day moving average. Now this stock is quickly pushing within range of triggering a
Market players should now look for long-biased trades if ALXN can manage to take out some near-term overhead resistance at $94.36 to $95.01 a share with high volume. Look for a sustained move or close above those levels with volume that's near or above its three-month average action of 1.7 million shares. If we get that action soon, then look ALXN to easily trade north of $100 a share in the near future.
On Thursday, over 24.4 million shares traded as ALXN closed up 2.5% to $93.10 a share. And just this morning, news has broken that ALXN has priced a public offering of 5 million shares of common stock at a price to the public of $93.02 a share. The net proceeds to Alexion, after deducting the underwriting discount and other estimated expenses, are expected to be around $462 million.
Another stock that's trading very close to triggering a breakout trade is
, an Internet television company in the People's Republic of China. Yoku's Internet television platform enables consumers to search, view and share video content across multiple devices. This stock is off to a bullish start in 2012, with shares up over 50yo%.
If you look at the chart for Yoku.com, you'll notice that during the last two months and change, this stock has been trading within a sideways pattern between $19.47 on the downside and $25.35 on the upside. On Thursday, shares of Yoku.com started to move back above its 50-day moving average of $23.50 a share with light volume. This move is quickly pushing YOKU within range of triggering a breakout trade above the upper-end of that recent sideways chart pattern.
Traders should now look for long-biased traders in YOKU if this stock can manage to trigger a break out above some near-term overhead resistance at $25.35 a share with high-volume. Look for a sustained move or close above $25.35 with volume that registers near or above its three-month average action of 2,553,320 shares. If we get that move soon, then look for potential upside in YOKU back towards its March high off $32.75 a share.
I would look to play YOKU off of strength since the stock is trending so close to both its 50-day moving average at $23.50 a share, and its 200-day moving average of $21.37 a share. Look for long-biased trades once it starts to move above $24.84 and $25.35 a share with volume if we get it soon, and simply use a stop just below $24 a share.
As of the most recently reported period, Yoku.com is one of the
and also shows up in
One more stock that's already entered breakout territory is trucking player
, an asset-based trucking company that provides a variety of transportation and supply chain solutions to a range of industries, including the retail, chemical and manufacturing industries. This stock is off to a monster start so far in 2012, with shares up over 70%.
If you look at the chart for Saia, you'll see that this stock has been uptrending extremely strong for the past six months, with shares skyrocketing from a low of $10.37 to a recent high of $21.28 a share. During that uptrend, shares of Saia have consistently made higher lows and higher highs, which is bullish technical price action. Also during that uptrend, this stock has never violated its 50-day moving average by more than 50 cents before buyers stepped in to defend the price. That shows how strong demand has been for this stock off of any pullback.
Now shares of Saia have just started to move into breakout territory on strong volume. On Thursday, the stock took out some near-term overhead resistance at $21.28 with 261,000 shares, which is well above its three-month average action of 160,314 shares.
Traders should now look for long-biased trades in SAIA as long as this stock trending above $21.28 a share with strong upside volume flows. I would consider any upside volume day that registers near or above 160,314 shares as bullish. If SAIA can maintain its trend above $21.28 and above its 50-day moving average of $18.30 a share, then this stock should be setting up to hit $30 a share in the near future.
You can buy this stock off of weakness as long as its trading above $21.28 a share or you could give it more room down towards $19 a share, with a stop just below its 50-day moving average of $18.30 a share. I would prefer to see SAIA just continue to trend over $21.28 and get long of some mild weakness.
To see more breakout candidates, check out the
portfolio on Stockpickr.
Written by Roberto Pedone in Winderemere, Fla.
Follow Stockpickr on
and become a fan on
At the time of publication, author had no positions in stocks mentioned.
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.