5 Stocks Triggering Big Breakout Trades

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 solar energy player SolarCity (SCTY), which I featured in June 13's "5 Stocks Poised for Breakouts" at around $51 per share. I mentioned in that piece that shares of SolarCity had recently formed a double bottom chart pattern at $45.79 to $46.11 a share. Following that bottom, shares of SCTY were starting to uptrend and approach a big breakout trade above some key near-term overhead resistance levels from $53.31 to $56.77 a share.

Guess what happened? Shares Solar City started to trigger that breakout on June 16th and 17th with strong upside volume flows. Volume on those days registered 5.62 and 24.13 million shares, which is well above its three-month average volume of 5.04 million shares. Shares of SCTY recently tagged a high of $79.40 a share, which represents a monster gain of well over 50% in just a few months. As you can see, when a stock breaks out with big upside volume flows you can capture huge gains very quickly.

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.

Tetraphase Pharmaceuticals

One clinical-stage biotechnology player that's starting to move within range of triggering a big breakout trade is Tetraphase Pharmaceuticals (TTPH) , which develops various antibiotics for the treatment of serious and life-threatening multi-drug resistant infections. This stock has been on fire over the last three months, with shares up sharply by 31%.

If you take a look at the chart for Tetraphase Pharmaceuticals, you'll notice that this stock has been uptrending a bit over the last month and change, with shares moving higher from its low of $10.03 to its recent high of $12.35 a share. During that uptrend, shares of TTPH have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of TTPH 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 TTPH if it manages to break out above its 200-day moving average of $12.04 a share and then above some key near-term overhead resistance at $12.35 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 190,092 shares. If that breakout starts soon, then TTPH will set up to re-test or possibly take out its next major overhead resistance levels at $13.50 to $14.71 a share.

Traders can look to buy TTPH off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $10.67 or at $10.18 to $10.03 a share. One can also buy TTPH 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.

Bluebird Bio

A clinical-stage biotechnology player that's starting to trend within range of triggering a big breakout trade is Bluebird Bio (BLUE) , which focuses on developing gene therapies for severe genetic and orphan diseases. This stock has been blazing a trail to the upside in 2014, with shares up huge by 73%.

If you take a glance at the chart for Bluebird Bio, you'll see that this stock broke out on Friday above some near-term overhead resistance at $36.13 a share. This breakout is now starting to push shares of BLUE within range of triggering a much bigger breakout trade above some major overhead resistance levels.

Traders should now look for long-biased trades in BLUE if it manages to break out above some key near-term overhead resistance levels at $40 to $41.22 a share and then above its all-time high of $41.75 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 425,764 shares. If that breakout kicks off soon, then BLUE will set up to enter new all-time-high territory above $41.75, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50, or even $55 a share.

Traders can look to buy BLUE off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $33.15 to $32.09 a share. One could also buy BLUE 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.

ZS Pharma

Another stock that's starting to trend within range of triggering a big breakout trade is ZS Pharma (ZSPH) , which focuses on the development and commercialization of non-absorbed drugs to treat renal, cardiovascular, liver and metabolic diseases. This stock hasn't done much so far in 2014, with shares up around 5%.

If you take a glance at the chart for ZS Pharma, you'll notice that this stock has been trending sideways and consolidating for the last two months, with shares moving between $25.51 on the downside and $33 on the upside. Over the last few weeks, shares of ZSPH have been uptrending from its low of $25.51 to its recent high of $30.48 a share. That move is starting to push shares of ZSPH within range of triggering a major breakout trade above the upper end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in ZSPH if it manages to break out above some near-term overhead resistance levels at $30.48 to $31 a share and then once it clears its all-time high at $33 a share with high volume. Watch for a sustained move or close above those levels with volume that hits near or above its three-month average action 183,183 shares. If that breakout develops soon, then ZSPH will set up to enter new all-time-high territory above $33, which is bullish technical price action. Some possible upside targets off that breakout are $40 to $45 a share.

Traders can look to buy ZSPH off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $27.21 or at $25.51 a share. One can also buy ZSPH off strength once it starts to move above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Alexion Pharmaceuticals

Another biotechnology player that's starting to trend within range of triggering a near-term breakout trade is Alexion Pharmaceuticals (ALXN) , which develops and commercializes life-transforming therapeutic products. This stock has been trending strong so far in 2014, with shares up sharply by 28%.

If you take a glance at the chart for Alexion Pharmaceuticals, you'll notice that this stock recently formed a triple bottom chart pattern, since shares found buying interest at $154.78, $154.38 and $154.46 a share. Since that bottom, shares of ALXN have been uptrending strong with the stock recently moving back above its 50-day moving average of $162.56 a share. That strong uptrend has now pushed shares of ALXN within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in ALXN if it manages to break out above Friday's intraday high of $171.44 a share and then once it clears some key near-term overhead resistance at $173.70 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average volume of 1.17 million shares. If that breakout materializes soon, then ALXN will set up to re-test or possibly take out its next major overhead resistance levels at $181.58 to its 52-week high at $185.43 a share.

Traders can look to buy ALXN off weakness to anticipate that breakout and simply use a stop that sits right around $165 a share or near its 50-day moving average of $162.56 a share. One can also buy ALXN 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.

Amyris

My final breakout trading prospect is specialty chemicals player Amyris (AMRS) , which provides various alternatives to a range of petroleum-sourced products for the specialty chemical and transportation fuel markets worldwide. This stock has been moving very strong over the last three months, with shares rising sharply by 33%.

If you look at the chart for Amyris, you'll notice that this stock has been uptrending over the last month, with shares moving higher from its low of $3.38 to Friday's intraday high of $4.15 a share. During that uptrend, shares of AMRS have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of AMRS have also recently cleared both its 50-day and 200-day moving averages, which is bullish. That move has now pushed shares of AMRS within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in AMRS if it manages to break out above some key near-term overhead resistance at $4.19 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 205,627 shares. If that breakout materializes soon, then AMRS will set up to re-test or possibly take out its next major overhead resistance levels at $4.88 to $5.25 a share, or even $5.50 a share.

Traders can look to buy AMRS off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $3.75 a share or its 200-day at $3.65 a share. One can also buy AMRS off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

 

 

 

Follow Stockpickr on Twitter and become a fan on Facebook.

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.

More from Investing

10 Key Takeaways From Google's Solid Earnings Report

10 Key Takeaways From Google's Solid Earnings Report

Amazon Is as Well-Positioned as Anyone to Create a Popular Home Robot

Amazon Is as Well-Positioned as Anyone to Create a Popular Home Robot

Bitcoin Today: Prices Flirt With $9,000 After Weekend Boom

Bitcoin Today: Prices Flirt With $9,000 After Weekend Boom

Tech Stocks Have You Baffled? Educate Yourself in Some Portfolio Diversification

Tech Stocks Have You Baffled? Educate Yourself in Some Portfolio Diversification

Halliburton Rises Slightly After Revenue Jump

Halliburton Rises Slightly After Revenue Jump