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 was electric car player Tesla Motors (TSLA) , which I featured in Aug. 4's "5 Stocks Ready for Breakouts" at around $233 per share. I mentioned in that piece that shares of Tesla Motors were ripping sharply higher right off its 50-day moving average with heavy upside volume flows. That sharp spike to the upside was quickly pushing shares of TSLA within range of triggering a major breakout trade above some key near-term overhead resistance levels at around $240 to $244.50 a share.
Guess what happened? Shares Tesla Motors triggered that breakout the following trading session with decent upside volume flows. Shares of TSLA have continued to uptrend since taking out those prior resistance levels, with the stock tagging a new all-time high earlier this month at $291.42 a share. That sharp move to the upside represents a gain of around 25% since I originally flagged this setup back around $233 a share. As you can see, trading breakouts can generate large gains in relatively short time frames once the prior resistance levels are cleared with decent upside volume flows.
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.
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