By Roberto PedoneWINDERMERE, Florida ( Stockpickr) -- Trading stocks that are breaking out can be a very profitable strategy if done right. That's because once a breakout occurs that isn't a rally, it can signal that a major fundamental change is occurring in a stock or in the entire stock market. A major fundamental change will usually create new trends, and new trends will cause breakouts that will have lasting power. For these reasons alone, investors should always be paying attention to which stocks and sectors are breaking out. Trading breakouts is not a new game on Wall Street. This strategy has been pioneered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas A breakout occurs when a stock makes a move through a significant level of support or resistance, which is usually followed by heavy volume and increased volatility. Wall Street players love to see an upside breakout because it demonstrates strength in the underlying asset as the price breaks above a level of previous resistance. An upside breakout can also take a stock to new highs, which will generate a lot of interest as the stock shows up on sophisticated software that scans for this type of action. Here 's a look at a number of stocks that are already breaking out or could be setting up to become solid breakout stock plays
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If you're looking for a stock that is breaking out to new all-time highs, look no further than Warner Chilcott ( WCRX). This company is a Bermuda-based specialty pharmaceutical company focused on the women's health care and dermatology segments of the U.S. pharmaceutical market.
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Another stock that could be setting up to breakout is VanceInfo ( VIT), an information technology service provider and an offshore development company in China. This company offers IT services including R&D services, enterprise solutions, application development and maintenance, testing, as well as globalization and localization.
Market players should also keep an eye on breakout stock play Alliance Resource Partners ( ARLP), a producer and marketer of coal, primarily to U.S. utilities and industrial users. This company operates nine underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.
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Tne final stock that could be setting up for a major breakout is Knightsbridge Tankers ( VLCCF), a company engaged in the international seaborne transportation of crude oil and dry bulk cargoes.
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