By Roberto Pedone

WINDERMERE, Fla. ( Stockpickr) -- To say the markets have been very difficult for the bulls during the past month would be quite the understatement. "Difficult" is putting it nicely. Due to a credit crisis in Greece and a "flash crash" scare that continues to defy explanation, the markets were absolutely hammered during May. The Dow Jones Industrial Average plunged 879.98 points, or 7.92%, for the month, marking the worst percentage drop in May since 1940, when shares fell 22%, and the worst May ever measured by points. That is a gigantic loss that even the most seasoned investor would have trouble stomaching.

Of course, if you've been short the markets during this time frame, then you've coined some cash. But for those who only like to go long stocks, one strategy that you can use in any market, bull or bear, is to look for stocks that are breaking out. A breakout chart pattern is simply a trend trading strategy which tries to isolate the strongest stocks in any market.

A breakout is when a stock makes a move through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Wall Street traders love to see a breakout because it demonstrates strength in the underlying asset as the price breaks above a level of previous resistance. A breakout can also take a stock to a new high that will generate a lot of interest as the stock shows up on Web sites and scanning software used by the most active investors and traders.

Let's take a look at the charts of this week's breakout stock plays. These stocks either are breaking out right now or could be setting up to attempt a big breakout in the near future.

Before we delve into this week's plays, let's see how powerful the breakout stock pattern can be. Back in March, Dendreon ( DNDN) traded above some previous resistance at around $30 a share on very big volume.

The stock quickly consolidated after breaking out, and the previous resistance level of $30 became a new area of support. After that support level held, the stock took off like a rocket ship and trended higher all the way up to a new 52-week high of $57.67.
Who Owns Dendreon?

This breakout produced almost a 100% gain in just three short months. That's an amazing move, and it clearly shows the power of the breakout chart pattern.

Now, on to this week's breakout stock plays.

AutoZone ( AZO) is a retail distributor of automotive replacement parts that's now in clear breakout territory. Recently, the stock made a powerful move on heavy volume that took the shares above previous resistance at around $187.94 a share. Also, it's worth noting that this bullish action has taken the stock into all-time-high territory. This means that almost everyone who has purchased this stock is making money.

The technical picture at AutoZone isn't the only thing that looks bright. The fundamentals are providing a strong catalyst that is helping to push AutoZone higher. Last Tuesday, the company reported that strong sales of automotive replacement parts and several new store openings helped to push net income up 17% during its fiscal third quarter. It's clear that the tough economic conditions are pushing cost-conscious consumers into repairing their existing cars on their own instead of buying a brand new vehicle.

The strong third quarter at AutoZone marked the company's 15th straight quarter of double-digit growth in earnings per share. As long as the economy remains challenging, and jobs remain scarce, this stock should continue to take out new highs into the foreseeable future.
Who Owns AutoZone?

Another stock worth watching that could be setting up to breakout is Pharmasset ( VRUS). This company is a clinical-stage pharmaceutical firm engaged in discovering, developing, and commercializing drugs to treat viral infections such as hepatitis C and HIV.

Shares of Pharmasset haven't broken out yet, but if the stock continues its current trend, it could break out and head much higher in the near future. The first area investors should watch for a breakout in the near-term is around $33.50 a share. If the stock can manage to take out that level, it can then make a run at the all-time high, which is around $37. If the upward momentum in this name continues, there is no reason this stock can't take out both of those resistance levels.

It's worth noting that the stock is trending above both the 50-day and 200-day moving averages. Keep a close eye on the up-volume if the stock challenges those two key levels of resistance mentioned above. The average daily volume is around 234,000 shares, so anything well above that would be considered bullish if the stock can manage to set new highs.
Recent Pro Portfolio Updates

If you believe in the Internet tsunami or a coming boom for 3D TVs, it won't be hard to understand why the next stock is closing in on new all-time highs. Shares of specialty electronics retailer hhgregg ( HGG) are seeing strong demand due to the explosion in smartphones, the drop in prices for high-end TVs and the upgrade trend in appliances spurred by the federal stimulus for energy-efficient goods.

This company is doing so well that just recently forecasted a 40 to 45 percent growth in sales for this year. From a technical standpoint, the stock is just starting to attempt a breakout above some previous resistance at around $30.50 a share. This move in the shares of hhgregg is being accompanied by heavy volume as the stock hovers around all-time highs. This stock is early into its move, so watch how it acts in the short term and look for some healthy consolidation if the trend higher is going to last.

Last but not least is Colombia-based banking institution BanColombia ( CIB). Apparently, Colombia has managed to sidestep much of the current economic crisis that has swept across the rest of the globe. This bank boasts of a customer base of almost 7 million and has operations in not just Colombia but also El Salvador, the U.S., the Cayman Islands and Peru.

Shares of this company are approaching a very important prior resistance level at around $49.70 a share. If the stock can manage to trade above that area, it would mark a very important breakout that would send shares of BanColombia to new all-time highs. Keep in mind that the stock just punched through some former resistance at around $48 as it makes its approach towards challenging new all-time highs.

To see more breakout action in stocks such as O'Reilly Automotive ( ORLY) and Monro Muffler Brake ( MNRO), check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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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.

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