5 Stocks to Trade for Big Breakout Gains

 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 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.

Google

 

One leading technology player that's starting to move within range of triggering a major breakout trade is Google (GOOGL) , which builds products and provides services to organize the information. This stock has been on fire so far in 2014, with shares up large by 44%.

If you take a look at the chart for Google, you'll notice that this recently formed a double bottom chart pattern at $577.88 to $577.01 a share. Following that bottom, shares of GOOGL have started to spike higher back above its 50-day moving average of $589.51 a share. Shares of GOOGL broke out on last Friday above some near-term overhead resistance at $603.52 a share with heavy upside volume. Volume on Friday registered 4.19 million shares, which is well above its three-month average action of 1.68 million shares. This spike to the upside is now quickly pushing shares of GOOGL within range of triggering a much bigger breakout trade.

Traders should now look for long-biased trades in GOOGL if it manages to break out above some near-term overhead resistance levels at $608.91 a share to its 52-week high at $615.05 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 action of 1.68 million shares. If that breakout develops soon, then GOOGL will set up to enter new 52-week-high territory above $615.05, which is bullish technical price action. Some possible upside targets off that breakout are $630 to $650 a share.

Traders can look to buy GOOGL off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $589.51 a share. One can also buy GOOGL off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

GOOGL was one of the top holdings at Julian Robertson's Tiger Management as of the most recently reported quarter.

Full House Resorts

A resorts and casinos stock that's starting to move within range of triggering a big breakout trade is Full House Resorts (FLL) , which owns, develops, manages and invests in gaming-related enterprises. This stock has been absolutely destroyed by the sellers so far in 2014, with shares down large by 62%.

If you take a glance at the chart for Full House Resorts, you'll see that this stock has formed a double bottom chart pattern over the last few weeks, with shares of FLL finding buying interest at 95 cents per share. Following that bottom, shares of FLL have started to spike higher off those support levels and it broke out above some near-term overhead resistance at $1.03 a share. That move is starting to push shares of FLL within range of triggering a much bigger breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in FLL if it manages to break out above some key near-term overhead resistance levels $1.13 a share to its 50-day moving average of $1.15 a share and then above more resistance at $1.20 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 78,017 shares. If that breakout gets underway soon, then FLL will set up to re-test or possibly take out its next major overhead resistance levels near $1.50 to $1.59 a share, or even $1.60 a share.

Traders can look to buy FLL off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support levels at 95 cents per share. One could also buy FLL 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.

Globalstar

A wireless communications player that's starting to trend within range of triggering a big breakout trade is Globalstar (GSAT) , which provides mobile voice and data communications services through satellite worldwide. This stock is off to a monster start so far in 2014, with shares up a whopping 130%.

If you take a glance at the chart for Globalstar, you'll notice that this stock formed a major bottoming chart pattern over the last month and change, with shares finding buying interest each time it pulled back to around $3.60 a share. Shares of GSAT have now started to spike higher off those support levels and it's now trending back above its 50-day moving average of $3.95 a share with strong upside volume flows. Volume on last Friday registered 5.49 million shares, which is well above its three-month average action of 4.13 million shares. This high-volume spike is now starting to push shares of GSAT within range of triggering a major breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in GSAT if it manages to break out above some near-term overhead resistance levels at $4.04 to $4.20 a share and then above more key resistance at $4.36 to its 52-week high at $4.53 a share with high volume. Watch for a sustained move or close above those levels with volume that registers near or above its three-month average action 4.13 million shares. If that breakout materializes soon, then GSAT will set up to enter new 52-week-high territory above $4.53, which is bullish technical price action. Some possible upside targets off that breakout are $5.50 to $6 a share.

Traders can look to buy GSAT off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.60 a share. One can also buy GSAT off strength once it starts to move above those breakout levels share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Corcept Therapeutics

Another pharmaceutical player that's starting to move within range of triggering a major breakout trade is Corcept Therapeutics (CORT) , which is engaged in the discovery, development and commercialization of drugs for the treatment of metabolic, psychiatric and oncologic disorders in the U.S. This stock has been under heavy selling pressure over the last six months, with shares down sharply by 30%.

If you take a glance at the chart for Corcept Therapeutics, you'll notice that this stock has been trending sideways over the last two months and change, with shares moving between $2.23 on the downside and $3.02 on the upside. This sideways trading action is coming after shares of CORT gapped down sharply back in May from over $4 a share to under $2 a share with heavy downside volume. Shares of CORT are now starting to spike higher here right off its 50-day moving average of $2.63 a share, and it's quickly moving within range of triggering a major breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in CORT if it manages to break out above some key overhead resistance levels at $2.94 to $2.99 a share and then above $3.02 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 225,191 shares. If that breakout starts soon, then CORT will set up to re-fill some of its previous gap-down-day zone from May that started just above $4 a share.

Traders can look to buy CORT off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.50 to $2.30 a share. One can also buy CORT off strength once it starts to trend above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Sysorex Global Holdings

My final breakout trading prospect is IT services and consulting player Sysorex Global Holdings (SYRX) , which provides systems integration and consulting services to government and commercial clients in various industries worldwide. This stock has been blazing a trail to the upside so far in 2014, with shares up huge by 73%.

If you look at the chart for Sysorex Global Holdings, you'll notice that this stock was recently downtrending badly from its high of $4.45 to its low of $2.75 a share. During that downtrend, shares of SYRX were consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of SYRX have now started to rebound sharply off that $2.75 low with strong upside volume flows. This rebound has now pushed shares of SYRX back above both its 50-day moving average at $3.68 and its 200-day moving average at $3.93 a share. That move has now pushed shares of SYRX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in SYRX if it manages to break out above some near-term overhead resistance at $4.45 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 34,934 shares. If that breakout kicks off soon, then SYRX will set up to re-test or possibly take out its next major overhead resistance levels at $5.50 to $6.20 a share, or even $7 a share.

Traders can look to buy SYRX off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $3.68 a share or just below more support at 3.50 a share. One can also buy SYRX 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.

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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