Updated from 5:34 a.m. EDT

Don't even think about playing in the Beat the Street trading contest if you're going to trade the Wal-Marts ( WMT) or Microsofts ( MSFT) of the world. While I believe both could be solid long-term investments, the key in a competitive stock-picking contest is to focus on two main strategies: snapbacks and breakouts.

Hedge funds that focus on short-term trading have modeled out the various types of snapbacks and breakouts that occur. For this week, I've set up a Rocket Stocks portfolio that focuses on the stocks most likely to succeed for the week.

Last week was brutal, with the market dropping over 400 points for the week, but this recent decline in stocks has created some great opportunities.

Before I talk about this week's Rocket Stocks, let's see how last week's picks performed.

  • Echelon (ELON): Finished the week down 10%.
  • CDC (CHINA): Finished the week down 13%.
  • China GreenTech (GRRF): Finished the week down 15%.
  • China Sunergy (CSUN): Finished the week down 19%.
  • Ensco (ESV): Finished the week down 3%.
  • Anadarko (APC): Finished the week down 2%.
  • Goldman Sachs (GS): Finished the week down 7%.
  • Tesoro (TSO): Finished the week down 5%.
  • Eagle Bulk Shipping (EGLE): Finished the week down 8%.
  • Ram Energy Resources (RAME): Finished the week up 29%.

Now let's take a look at the Rocket Stocks for the Week of May 27-May30.

First up this week is China Nepstar ( NPD), which could snap back into the company's earnings on Wednesday.

China Nepstar operates as one of the largest retail drugstores in mainland China, providing over-the-counter drugs, supplements and various personal care products.

The company has $400 million in cash and zero debt, and its largest shareholder is Goldman Sachs, which owns 25% of the company. Shares are down a whopping 30% for the year, from a high of $18 or so.

With the Chinese middle class caring more and more about psychical health, coupled with recent environmental issues, shares of China Nepstar could move much higher.

Another stock to keep an eye on is Coldwater Creek ( CWTR), which is set to report earnings on Wednesday as well.

Now, Coldwater Creek has been a massive disappointment for investors over the past year. Sales in the women's apparel retailer have slowed substantially, sending shares down from an all-time high of $25.70 to $5.60.

Coldwater Creek has a monster short interest of 20%, and with positive earnings announcements from Gap ( GPS) and The Children's Place ( PLCE), the slightest piece of positive news could send the shorts running to cover.

Another name worth looking at is Ternium ( TX), which has lagged the overall steel and coal sectors based on fears that Chavez is going to "take over" the company.

Prices for Ternium's iron ore pellets are projected to be up 87% from 2007 to 2008, to $147 per ton from $79 per ton, and prices for coal are projected to be up 208%, to $300 per ton from $97 per ton.

Ternium is trading with a 7.8 forward P/E.

Other stocks making this week's Rocket Stocks portfolio include Joy Global ( JOYG), Visa ( V) and Nucor ( NUE).

To find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:

  • Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard.

    When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. The funds will be buying at the lower prices and likely supporting the stock.
  • Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks that can snap back.
  • Biotech Short Squeezes: Dendreon (DNDN) and others can often be found in this category.
  • Stocks Rising on Unusual Volume. These are potential breakout plays.
  • Stockpickr's System Trades of the Day: These are trades triggering that day in various back-tested trading systems we've developed.
  • Stocks With Unusual Options Activity: Perhaps someone knows something?
  • Latest Activist Situations: These are stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on the must-view list.
  • One final place to frequent is the Answers section on Stockpickr, where ideas such as those presented in this article are thrown around daily. And you can further discuss your ideas and share opinions in Stockpickr's Member Forums section.

    At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

    James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the Financial Times and the author of Trade Like a Hedge Fund, Trade Like Warren Buffett and SuperCa$h. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

    TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.

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