By Roberto PedoneWINDERMERE, 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.
|Who Owns Dendreon?|
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.
|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.
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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.
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.
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