Skip to main content

 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.

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 possibly trade higher from current levels.

Apple

Image placeholder title

One stock that's trending very close to triggering a major breakout trade is Apple (AAPL) - Get Apple Inc. (AAPL) Report, which designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players worldwide. This stock has been trending strong over the last six months, with shares moving to the upside by 31%.

If you take a look at the chart for Apple, you'll see that this stock bumping along and holding its 50-day moving average for the last month or so. Shares of APPL have now started to condense their trading pattern, and the stock is coiling up very tight here in a narrow range. This type of a chart pattern can often produce an explosive move once the stock picks a direction and moves out of the range. Considering the recent uptrend, shares of AAPL look more likely to resolve to the upside out of this coiled chart pattern.

Traders should now look for long-biased trades in AAPL if it manages to break out above some near-term overhead resistance levels at $127.50 to $128.57 a share and then above more resistance at $129.25 to $129.57 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 55.14 million shares. If that breakout materializes soon, then AAPL will set up to re-test or possibly take out its next major overhead resistance levels at around $131 to its 52-week high of $133.60 a share. Any high-volume move over $133.60 will then give AAPL a chance to make a run at $140 to $150 a share.

Traders can look to buy AAPL off weakness to anticipate that breakout and simply use a stop that sits right around some near-term support levels at $124.50 or around $123 a share. One can also buy AAPL off strength once it starts to launch above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Sphere 3D

Image placeholder title

Another tech stock that's starting to move within range of triggering a big breakout trade is Sphere 3D (ANY) - Get Sphere 3D Corp. Report, which provides virtualization technology and data management solutions in the Americas, Europe, the Middle East, Africa and the Asia Pacific. This stock has been hit hard by the bears over the last six months, with shares getting smacked lower by 35.2%.

If you take a glance at the chart for Sphere 3D, you'll notice that this stock has been downtrending badly for the last month and change, with shares plunging lower from a high of $7.49 to an intraday low on Thursday and new 52-week low of $2.98 a share. During that downtrend, shares of ANY have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ANY reversed off that new low Thursday with monster volume. Volume on the day registered 922,000 shares, vs. its three-month average volume of 281,507 shares.

Traders should now look for long-biased trades in ANY if it manages to break out above some key near-term overhead resistance levels at $3.61 to $3.90 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 281,507 shares. If that breakout develops soon, then ANY will set up to re-test or possibly take out its next major overhead resistance levels at $4.20 to its 50-day moving average of $4.53 a share, or even $5 a share.

TheStreet Recommends

Traders can look to buy ANY off weakness to anticipate that breakout and simply use a stop that sits right around $3.20 a share or key off that new 52-week low of $2.98 a share. One could also buy ANY off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

PhotoMedex

Image placeholder title

Another stock that's starting to trend within range of triggering a big breakout trade is PhotoMedex (PHMD) , which provides integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers in North America, the Asia Pacific, Europe and South America. This stock has destroyed by the bears over the last six months, with shares down huge by 60%.

If you take a glance at the chart for PhotoMedex, you'll see that this stock has recently formed a double bottom chart pattern at $1.77 to $1.78 a share. That bottom formed for shares of PHMD right above the its 50-day moving average. This stock has also held above a key uptrend line from mid-March as that bottomed took place. Shares of PHMD are now quickly moving within range of triggering a major breakout trade above some key near-term overhead resistance levels and above a significant downtrend line that dates back to January.

Traders should now look for long-biased trades in PHMD if it manages to break out above some near-term overhead resistance levels at $2.08 to $2.09 a share and then above around $2.20 to $2.25 a share with high volume. Watch for a sustained move or close above those levels with volume that registers near or above its three-month average action of 291,192 shares. If that breakout gets set off soon, then PHMD will set up to re-test or possibly take out its next major overhead resistance levels at $2.50 to $2.95 a share.

Traders can look to buy PHMD off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support levels at $1.78 to $1.77 a share. One can also buy PHMD off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Dealertrack Technologies

Image placeholder title

Another technology stock that's starting to trend within range of triggering a near-term breakout trade is Dealertrack Technologies (TRAK) , which provides Web-based software solutions and services to the automotive retail industry in the U.S. and Canada. This stock has been moving marginally lower over the last six months, with shares off by just 5.3%.

If you take a glance at the chart for Dealertrack Technologies, you'll notice that this stock has been consolidating after a downtrend, with shares moving sideways over the last month and change between $36.76 on the downside and $39.72 on the upside. This stock recently put in a double bottom at $36.76 to $36.85 a share. Shares of TRAK are now spiking higher off those support levels and it's quickly moving within range of triggering a near-term breakout trade above the upper-end of its sideways trending chart pattern.

Traders should now look for long-biased trades in TRAK if it manages to break out above some key near-term overhead resistance levels at $39.72 a share and then above its 50-day moving average of $39.88 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 533,320 shares. If that breakout develops soon, then TRAK will set up to re-test or possibly take out its next major overhead resistance levels at $41.06 to $43 a share, or even possibly re-fill a previous gap back towards $45 a share.

Traders can look to buy TRAK off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support levels. One can also buy TRAK off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

La Jolla Pharmaceutical

Image placeholder title

My final breakout trading prospect is biotechnology stock La Jolla Pharmaceutical (LJPC) - Get La Jolla Pharmaceutical Company Report, which focuses on the discovery, development and commercialization of therapeutics for chronic organ failure and cancer. This stock has been on a monster run over the last six months, with shares screaming sharply higher by 115.5%.

If you look at the chart for La Jolla Pharmaceutical, you'll notice that this stock just recently came out of a downtrend that took it lower from its 52-week high of $24.89 to its April low of $17.14 a share. Following that slide lower, shares of LJPC have now started to stabilize and enter a mini-uptrend, with the stock moving higher off that $17.14 low to its recent high of $19.89 a share. This stock is now consolidating right above that recent high and it's beginning to trend within range of triggering a big breakout trade.

Traders should now look for long-biased trades in LJPC if it manages to break out above some key near-term overhead resistance levels at $19.30 to $19.89 a share and then above its 50-day moving average of $19.96 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 140,061 shares. If that breakout catches on soon, then LJPC will set up to re-test or possibly take out its next major overhead resistance levels at $21 to $22.50 a share, or even $24 to $25 a share.

Traders can look to buy LJPC off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $17.39 to $17.14 a share. One can also buy LJPC off strength once it starts to push above those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.