Tuesday kicked off the shortened trading week with a step backward for U.S. markets after last week's rebound. All told, the S&P 500 shed 0.68% during the session.

But as an investor, the real number you should be paying attention to from yesterday is 131. That's how many S&P components actually managed to finish higher Tuesday. In other words, even when Mr. Market is correcting, there's a not-so-small contingent of stocks that are actually working. Owning them could be the key to posting some serious gains in the second half of 2016.

To figure out which stocks look positioned to outperform in July, we're turning to the charts for a technical look at five stocks that are teetering on the edge of breakout territory this summer.

In case you're unfamiliar with technical analysis, here's the executive summary: Technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

Without further ado, here's a rundown of five technical setups that are showing solid upside potential right now.

Union Pacific 

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Leading off our list is Union Pacific (UNP) - Get Report  . This $73 billion railroad company has been a strong performer so far in 2016, up 11.5% since the calendar flipped to January. But don't worry if you've missed that upside move in UNP so far this year, a bullish continuation pattern points to more of the same in the second half of the year. Here's how to trade it.

Union Pacific is currently forming an ascending triangle pattern, a bullish continuation setup that's formed by horizontal resistance up above shares at $90, and uptrending support to the downside. Basically, as shares bounce in between those two technically-significant price levels, they've been getting squeezed closer and closer to a breakout through that $90 price ceiling. When that happens, we've got our buy signal.

Relative strength is the side-indicator that adds some confidence to theUnion Pacific trade right now. Our relative strength line, which measures UNP's price performance versus the broad market, has been in an uptrend since the beginning of the year, confirming that this stock is still outperforming right now. Once shares can catch a bid above $90, we've got a renewed signal that buyers are back in control of the price action here.

Helen of Troy

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$3 billion consumer brands company Helen of Troy (HELE) - Get Report  may not have much in common with the railroad business, but the two charts sure do. Like Union Pacific, Helen of Troy is forming a textbook ascending triangle pattern. For this stock, the key breakout level to watch is resistance up at $106.

What's so special about the $106 level? It all comes down to buyers and sellers. Price patterns, like this ascending triangle setup in Helen of Troy, are a good quick way to identify what's going on in the price action, but they're not the actual reason that makes the stock tradable. Instead, the "why" comes down to basic supply and demand for HELE's shares themselves.

The $106 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $106 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. So if Helen of Troy can muster the strength to break above $106, this stock finally becomes a high-probability buy.


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Things haven't looked quite so good for shares of $7 billion retailer Kohl's (KSS) - Get Report  lately. This stock has lost almost 23% of its market value so far this year, underperforming the S&P by a big margin. That's the bad news. The good news is that this stock is finally beginning to look "bottomy" this summer.

Kohl's is currently forming a double bottom pattern, a bullish reversal setup that looks just like it sounds. The double bottom is formed by a pair of swing lows that bottom out at approximately the same price level -- the pattern triggers a buy on a move above the peak that separates that pair of troughs. For Kohl's, that key breakout level to watch is resistance up at $38.

Price momentum is another important indicator to watch in Kohl's. 14-day RSI, our momentum gauge in this stock, has been trending higher ever since shares bottomed for the first time in May. That's a bullish divergence that signals buyers are building strength here. Once $38 gets taken out, it's time to buy.

ARM Holdings

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Despite basically hanging out around breakeven year-to-date, ARM Holdings (ARMH)  has been in "rebound mode" for most of 2016 -- and it doesn't take an expert technical trader to see why. In fact, the price action in this $20 billion tech stock is about as simple as it gets right now. Put simply, ARM Holdings is still a "buy-the-dips stock" this summer. Here's how to trade it.

After kicking off the year moving lower, ARM Holdings has been rebounding in a well-defined uptrending channel since February. The uptrend in ARM Holdings is formed by a pair of parallel support and resistance lines that have managed to corral about 95% of this stock's price action over that timeframe. Put simply, every time this stock has touched the bottom of its price range, it's presented traders with a low-risk, high-reward buying opportunity. That means the next bounce higher is a buy signal.

Waiting for that bounce is important for two key reasons: It's the spot where shares have the most room to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before the channel breaks, and you know you're wrong).

Remember, all trend lines do eventually break, but by actually waiting for a bounce to happen first, you're ensuring ARM Holdings can still catch a bid along that line before you put your money on shares.

The GEO Group

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Last up on our list of potential breakout trades is $2.5 billion real estate investment trust The GEO Group (GEO) - Get Report . The GEO Group has been a stellar performer in 2016, handing investors total returns of 23% so far this year. And this summer, shares are teetering on the edge of breakout territory thanks to a not-so-textbook price setup.

Since this stock peaked back at the end of March, it has evolved into an inverse head and shoulders pattern, a price setup that signals exhaustion among sellers. This stock's chart pattern is formed by two swing lows that bottom out at approximately the same level (the shoulders), separated by a lower low (the head). The buy signal comes on a move through the GEO Group's neckline at $34 -- that's the key price level to watch from here.

Typically, the inverse head and shoulders pattern is a reversal setup that shows up at the bottom of a selloff, not a continuation pattern that comes after an uptrend. But even though the price setup in GEO isn't exactly textbook, it's still tradable. If $34 gets taken out by buyers, we've got an important signal that GEO just opened up a lot more upside potential in 2016.

Keep a close eye on this one. Shares are within grabbing distance of that $34 price tag this week.

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