5 Stocks Poised for Breakouts

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.

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One example of a successful breakout trade I flagged recently bio therapeutic drugs player Northwest Biotherapeutics (NWBO), which I featured in Jan. 17's "5 Stocks Ready to Break Out" at $4.50 share. I mentioned in that piece that shares of NWBO had been uptrending with the stock consistently making higher lows and higher highs, which is bullish technical price action. That uptrend was starting to push shares of NWBO within range of triggering a big breakout trade above some key overhead resistance levels at $4.62 to $4.75 a share and then above $5 to $5.25 a share.

Guess what happened? Shares of NWBO started to flirt with those levels in last January and then the stock pulled back modestly to its recent low of $4.82 a share in early February. Shares of NBWO then geared up broke out again with strong upside volume flows and the stock tagged an intraday high today of $6.50 a share. That represents a monster gain of 40% in one month for anyone who bought this stock near $4.50 and anticipated the breakout. As you can see, trading breakouts can rack up huge profits in a very short timeframe when the trade works out.

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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.

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With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

Opko Health

One biopharmaceutical player that's quickly moving within range of triggering a big breakout trade is Opko Health (OPK), which is developing a range of solutions to diagnose, treat and prevent various conditions, including molecular diagnostics tests, laboratory developed tests, point-of-care tests and pharmaceuticals and vaccines. This stock is off to a decent start in 2014, with shares up by just over 7%.

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If you take a look at glance at the chart for Opko Health, you'll notice that this stock is gapping sharply higher today back above both its 200-day moving average at $8.53 a share and its 50-day moving average of $8.57 a share. This spike higher is starting to push shares of Opko Health within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in OPK if it manages to break out above some near-term overhead resistance levels at $9.15 to $9.20 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 4.28 million shares. If that breakout comes to fruition soon, then OPK will set up to re-test or possibly take out its next major overhead resistance levels at $11 to $11.64 a share. Any high-volume move above those levels will then put its 52-week high at $12.95 into range for shares of OPK.

Traders can look to buy OPK off any weakness to anticipate that breakout and simply use a stop that sits right around its 200-day moving average of $8.53 a share or right below some key near-term support at $8.36 a share. One can also buy OPK off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Sangamo Biosciences

A biotechnology player that's quickly pushing into range of triggering a major breakout trade is Sangamo Biosciences (SGMO), which focuses on the research, development and commercialization of zinc finger DNA-binding proteins for gene regulation and gene modification in the U.S. This stock has been on fire over the last six months, with shares up huge by 93%.

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If you take a look at the chart for Sangamo Biosciences, you'll notice that this stock has been consolidating and trending sideways over the last two months, with shares moving between $17.61 on the downside and $20.74 on the upside. Shares of SGMO are now starting to spike sharply higher off the lower-end of its recent range and the stock is now quickly approaching a major breakout trade.

Traders should now look for long-biased trades in SGMO if it manages to break out above some near-term overhead resistance at $20.30 a share and then once it clears its 52-week high at $20.74 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1 million shares. If that breakout hits soon, then SGMO will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30 a share.

Traders can look to buy SGMO off any weakness to anticipate that breakout and simply use a stop that sits right around its range low at $17.61 a share. One could also buy SGMO off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

ChemoCentryx

Another biotechnology player that's quickly moving within range of triggering a major breakout trade is ChemoCentryx (CCXI), which focuses on the discovery, development and commercialization of orally-administered therapeutics to treat autoimmune diseases, inflammatory disorders and cancer in the U.S. This stock has been in play with the bulls over the last three months, with shares up sharply by 50%.

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If you take a glance at the chart for ChemoCentryx, you'll see that this stock has been uptrending very strong over the last three months and change, with shares soaring higher from its low of $4.57 to its recent high of $7.71 a share. During that uptrend, shares of CCXI have been consistently making higher lows and higher highs, which is bullish technical price action. This spike on Friday is now starting to push shares of CCXI within range of triggering a major breakout trade.

Traders should now look for long-biased trades in CCXI if it manages to break out above some near-term overhead resistance at $7.71 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 501,461 shares. If that breakout triggers soon, then CCXI will set up to re-fill some of its previous gap-down-day zone from last September that started at $8.50 a share. If that gap gets filled with strong volume, then CCXI will have a chance to re-fill some of another massive gap from last August that started just above $12 a share.

Traders can look to buy CCXI off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $7 a share or near its 50-day at $6.29 a share. One can also buy CCXI off strength once it starts to take out $7.71 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Puma Biotechnology

Another biotechnology player that's starting to push within range of triggering a near-term breakout trade is Puma Biotechnology (PBYI), which engages in the acquisition, development and licensing of products for the treatment of various forms of cancer. This stock has been a monster for the bulls over the last three months, with shares up huge by 181%.

If you look at the chart for Puma Biotechnology, you'll see that shares of PBYI are spiking sharply higher today right above some near-term support at $116.14 a share. This move is quickly pushing shares of PBYI within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in PBYI if it manages to break out above some near-term overhead resistance levels at $130 to $131.90 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 368,598 shares. If that breakout hits soon, then PBYI will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $143.65 a share.

Traders can look to buy PBYI off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $120 or at $116.14 a share. One can also buy PBYI off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

MannKind

My final breakout trading prospect is biotechnology player MannKind (MNKD), which focuses on the discovery, development and commercialization of therapeutic products for diabetes and cancer in the U.S. This stock is off to a solid start in 2014, with shares up by 15%.

If you look at the chart for MannKind, you'll notice that this stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $4.86 to its recent high of $6.18 a share. That uptrend has pushed shares of MNKD back above both its 50-day and 200-day moving averages, which is bullish. Shares of MNKD are now quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in MNKD if it manages to break out above some near-term overhead resistance levels at $6.18 to $6.25 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 6.34 million shares. If that breakout triggers soon, then MNKD will set up to re-test or possibly take out its next major overhead resistance levels at $7.21 to its 52-week high at $8.70 a share.

Traders can look to buy MNKD off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $5.46 a share. One can also buy MNKD off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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