WINDERMERE, Fla. ( Stockpickr) -- The stock market is off to a fantastic start in 2011, despite many calls for a deep correction to start the New Year.

Recently, the Dow Jones Industrial Average was up over 100 points, or around 1%, and the S&P 500 was up about 14 points, or around 1.1%. The tech-heavy Nasdaq was leading the market with gains of around 1.5%, or a rise of about 39 points.

The calls for a correction by many market pundits are understandable since the market has been doing nothing but trending higher since the lows we hit in late August of 2010. However, just because some investors think the market is due for selloff does not mean that the market will accommodate them. Clearly, the path of least resistance right now is higher, so instead of guessing if the market might correct, it's probably a better strategy to continue to look for stocks that are setting up to go higher.

Related: Top Bank Stocks for 2011

One way to find stocks that are setting up to trade significantly higher is to search the market for names that 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 solid breakout stock candidates that could have big upside potential.

Citigroup

One stock that looks ready to break out is banking giant Citigroup ( C), a global diversified financial services holding company that provides consumers, corporations, governments and institutions with a wide range of financial products and services.

If you take a look at the chart for Citigroup, you'll see that the stock is starting to break out above some previous overhead resistance at around $4.85. If the stock can manage to close above that price level, then the next areas of major resistance will come into play at around $5 to $5.43 a share. Market players should watch for volume on any breakout above $4.85 to come in well above the three-month average trading activity of around 538 million shares.

As I write this, the volume is tracking in around 539 million, so if the stock can close above $4.85 and the volume continue to come in, it should confirm that this breakout has some lasting power. If we do get a closing volume breakout that is well above 538 million shares, I would suggest that market players watch for a move back above $5 to $5.43 a share. I am emphasizing those levels because a move above both would be a major win for the bulls on Citigroup. Also, getting above $4.85 with volume will increase the probability of a move above $5 to $5.43.

The reason getting above $5.43 specifically is important is because in my opinion it will set up Citigroup for a move back above $8 to $9 a share. There just isn't much resistance left on the chart that should get in the way of this stock trading significantly higher if we can finally clear $5.43, which was last hit in September of 2009.

With shares of Citigroup currently trading around $4.88, this potential breakout gives you a great opportunity to get positioned in the stock before a major move higher. And now you know which price levels, if taken out, will give this stock the greatest chance of finally moving significantly above $5 a share. Keep in mind that Citigroup is now trading well above its 50-day moving average ($4.43) and its 200-day moving average ($4.15). This demonstrates that the stock is in a bullish uptrend and demand is there from the large institutional money managers.

Citigroup comprises 7.2% of John Paulson's portfolio as of the most recent reporting period and is also owned by D.E. Shaw, which increased its position in the stock by 96%. InvestorPlaced highlighted Citi as one of several stocks that could double in 2011, and it made Robert Holmes' list of top stocks under $5 for 2011.

Goldman Sachs

A financial stock that's starting to break out is Goldman Sachs Group ( GS), a bank holding company and global investment banking, securities and investment management firm. The company is a market leader in its industry and is well-known around the globe for a being a top player in the mergers and acquisitions market. In fact, Goldman returned to the top spot in 2010 as the global M&A advisor, retaking the position from its competitor Morgan Stanley ( MS).

Goldman is making big headlines today after announcing that along with Russian investors Digital Sky Technologies, it will invest $500 million in the popular online social network site Facebook. This total investment by Goldman and Digital Sky will now reportedly value Facebook at $50 billion. But what's more important here is that Goldman Sachs will now become a publically traded way for market players to gain exposure to Facebook, which is growing like gangbusters and is profitable. It's been reported that Facebook brought in $2 billion in sales in 2010.

If you take a look at the chart for Goldman Sachs Group, you'll see that the stock is starting to break out above some previous overhead resistance at around $171 a share. This breakout is very significant for Goldman because that $171 level previously had formed a double-top chart pattern where the stock had failed and traded lower twice in the past three months. A breakout now above $171 could mean that the bears have lost control of the stock and that momentum is shifting toward the bulls.

What market players should watch for now is for Goldman to close above $171 on volume well above the three-month average trading activity of 5.5 million shares. Recently the volume on Goldman was tracking on at 4.1 million, so we're going to need to see better volume come into the stock in the next few trading sessions if shares can manage to hold above that critical $171 area.

My take is that as we move forward into the week, the big investment in Facebook by Goldman is going to attract more money and probably get the volume the stock will need to confirm the breakout. If this does indeed occur, Goldman should setup for another bullish trend that could take the stock back towards $177 to $185 a share if not even higher. Keep this stock on your breakout trading radar for the rest of the week and for the near future.

Major holders of Goldman include Julian Robertson at Tiger Managment, who increased his position by 34% in the most recent reporting period; the stock now comprises 8.2% of Tiger's total portfolio. Goldman also makes up 7.7% of Bruce Berkowitz's portfolio. Dan Freed recently called Goldman one of 11 inflataion-proof financial stocks.

JPMorgan Chase

One more bank stock that's starting to breakout is JPMorgan Chase ( JPM), a financial holding firm that provides various financial services worldwide. The company primarily operates in six business segments: investment banking, retail financial services, card services, commercial banking, treasury and securities services and asset management.

If you take a look at the chart for JPMorgan Chase, you'll see that this stock has already started to take out some major overhead resistance levels and is now in full breakout territory. Recently, the stock took out some resistance at around $42 a share and now today at $43 a share. These moves on the stock have now cleared the way of some big sellers that were in control of JPM for almost seven months.

That's right -- JPM had been stuck in a sideways trading pattern since back in July where the stock traded from around $41 to $42 a share on the upside to around $35 to $37 a share on the downside.

This is why this breakout on JPM is so significant, because it moves the stock clearly out of that sideways trading pattern. This could mean that the shares are entering a new bullish uptrend that should have no problem taking the stock back towards the next significant overhead resistance level at around $48 a share. Market players should now watch for volume to come in above the three-month average volume of 37 million shares for confirmation that the breakout could be the real deal.

Recently, the volume was around 32.4 million shares, so if you're a bull, understand that volume could be better, but the price for now is trumping everything else. Let's hope the volume picks up because it will increase the probability of the stock entering a new bullish uptrend. However, the way things are setting up right now on JPM, my take is that a run towards $48 is going to happen.

Among JPMorgan's high-profile investors are John Paulson and Blue Ridge Capital. Maria Woehr recently named CEO Jamie Dimon one of the best industry-loved bank CEOs of 2010, and Robert Holmes recommended JPMorgan as a dividend stock to play defense in 2011.

To see more breakout action in stocks such as Wells Fargo ( WFC), Bank of New York Mellon ( BK) and U.S. Bancorp ( USB), 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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