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 energy services player Recon Technology (RCON), which I featured in Feb. 6's "5 Stocks Under $10 Set to Soar" at $4.50 share. I mentioned in that piece that shares of RCON had been uptrending strong over the last few months, soaring higher from a low of $2.84 to a recent high of $5.06 a share. This stock has just started to cross back above its 50-day moving average and that move was quickly pushing shares of RCON within range of triggering a major breakout trade above some key resistance levels at $4.75 to $5.06 and then $5.80 a share.
Guess what happened? Shares of RCON started to challenge those resistance levels the following week, with shares ripping higher above $4.75 to $5.06 on Feb. 11. Then on Feb. 13 shares of RCON exploded to the upside taking out its 52-week high at $5.80 a share after the stock tagged an intraday high of $6.33 a share. That represents a gain of 40% for anyone who bought this stock around $4.50 and anticipated that breakout. I don't think this stock is anywhere near done going higher and if we can take out and close above $6.33 with volume soon, then $8 to $10 a share is very achievable.
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.