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 business intelligence and information applications software player Actuate (BIRT), which I featured in May 15's "5 Stocks Ready for Breakouts" at $4 a share. I mentioned in that piece that shares of Actuate had recently gapped down sharply from over $5.50 to its 52-week low of $3.41 a share with heavy downside volume. Following that move, shares of BIRT were starting to rebound off its 52-week low and were beginning to move within range of triggering a major breakout trade that had the potential to take the stock back into its gap-down-day zone.
Guess what happened? Shares of BIRT didn't wait long to trigger that breakout, since the stock started to take out those breakout levels the following trading session with strong upside volume flows. Volume the following two trading sessions after my article hit 1.58 and 1.44 million, which is well above its three-month average action of 588,000 shares. This stock continued to uptrend the rest of the month with BIRT tagging an intraday high on May 28 of $4.82 a share. That represents a solid gain of 20% in just a few weeks for anyone who bought the stock ahead of the breakout.
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.