DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players who can ultimately push the stock significantly higher.
One example of a successful breakout trade I flagged recently was medical technology player Biolase (BIOL), which I featured in Dec. 26's "5 Stocks Under $10 Set to Soar" at $2.11 share. I mentioned in that piece that shares of BIOL had been uptrending strong recently, with the stock moving higher from its low of $1.47 to its high of $2.25 a share. During that move, shares of BIOL had been making mostly higher lows and higher highs, which is bullish technical price action. That move had pushed shares of BIOL within range of triggering a big breakout trade above some key overhead resistance levels at $2.25 to $2.50 a share.
Guess what happened? Shares of BIOL didn't wait long to trigger that breakout, since the stock exploded higher the following trading session with heavy upside volume. Shares of BIOL tagged an intraday high on Dec. 30 of $3.55 a share, and volume for that trading session was 6.68 million shares, vs. its three-month average action of 448,627 shares. That represents a monster gain of close to 70% in just two days for anyone who bought shares of BIOL in anticipation of that breakout. As you can see here, trading high-volume breakouts can lead to monster profits in the markets.
Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.
Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels and hold above those breakout prices, then it can easily trend significantly higher.
With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.