5 Stocks Ready 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.

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 possibly trade higher from current levels.

E-Commerce China Dangdang


One stock that's starting to spike within range of triggering a near-term breakout trade is E-Commerce China Dangdang  (DANG), which primarily sells books, audio-visual products, periodicals, consumer electronics and electronic publications through its Web site dangdang.com. This stock has been smacked lower over the last six months, with shares off by 25.9%.

If you take a look at the chart for E-Commerce China Dangdang, you'll see that this stock has been uptrending over the last month and change, with shares moving higher from its low of $7.49 to its recent high of $10.25 a share. During that uptrend, shares of DANG have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of DANG bounced higher on Thursday despite the market weakness right above its 50-day moving average of $8.87 a share. That bounce is now starting to push this stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in DANG if it manages to break out above some near-term overhead resistance levels at $9.70 to $9.80 a share and then above more resistance at $10.25 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 956,010 shares. If that breakout triggers soon, then DANG will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $10.98 to $11.50 a share, or even $12 a share.

Traders can look to buy DANG off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $8.87 a share or near some support at $8.77 a share. One can also buy DANG 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.

Genetic Technologies


A health care stock that's starting to trend within range of triggering a near-term breakout trade is Genetic Technologies  (GENE), which provides genetic testing services primarily in Australia and the U.S. This stock has been on fire over the last six months, with shares sharply to the upside by 100.9%.

If you take a glance at the chart for Genetic Technologies, you'll notice that this stock has been uptrending a bit over the last month, with shares making mostly higher lows and higher highs, which is bullish technical price action. That uptrend has been choppy though, since the stock has gapped a few times and sold off sharply following each new high. This stock bounced to the upside on Thursday as the market fell apart, and that bounce is now starting to push shares of GENE within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in GENE if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $4.87 a share and then above more resistance levels at $5 to $5.25 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 5.26 million shares. If that breakout kicks off soon, then GENE will set up to re-test or possibly take out its next major overhead resistance levels at $6 to $6.67 a share, or even $7 to $8 a share.

Traders can look to buy GENE off weakness to anticipate that breakout and simply use a stop that sits right around some near-term support at $4 a share. One could also buy GENE off strength once it begins to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Seventy Seven Energy


Another stock that's starting to move within range of triggering a major breakout trade is Seventy Seven Energy  (SSE), which provides oilfield services in the U.S. This stock has been red hot over the last three months, with shares ripping to the upside by 28.1%.

If you take a glance at the chart for Seventy Seven Energy, you'll see that this stock has been uptrending strong over the last month and change, with shares moving higher from its low of $2.79 to its recent high of $5.49 a share. During that uptrend, shares of SSE have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of SSE ripped higher on Thursday right above some near-term support levels at $4.44 and its 50-day moving average of $4.26 a share with strong upside volume flows. That strong bounce in the face of a market meltdown has now pushed shares of SSE within range of triggering a major breakout trade above a key downtrend line that dates back to last December.

Traders should now look for long-biased trades in SSE if it manages to break out above that key downtrend line that will trigger over $5.15 to $5.50 a share and then above more resistance at $6 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 of 689,061 shares. If that breakout develops soon, then SSE will set up to re-test or possibly take out its next major overhead resistance levels at $7 to $7.80 a share, or even $9 a share.

Traders can look to buy SSE off weakness to anticipate that breakout and simply use a stop that sits right some key near-term support levels at $4.44 to its 50-day moving average of $4.26 a share. One can also buy SSE 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.

Mast Therapeutics

A clinical-stage biotechnology player that's starting to spike within range of triggering a big breakout trade is Mast Therapeutics  (MSTX), which develops therapies for serious or life-threatening diseases. This stock has been moving notably to the upside over the last three months, with shares higher by 15.7%.

If you take a glance at the chart for Mast Therapeutics, you'll see that this stock has recently attempted to carve out a major bottoming chart pattern, since shares have found buying interest over the last month at 46 to 47 cents per share. This stock ripped higher on Thursday in the face of a bearish trending market right off its 50-day moving average of 50 cents per share with heavy upside volume flows. That move is now pushing shares of MSTX within range of triggering a big breakout trade above a key downtrend line that dates back to around February.

Traders should now look for long-biased trades in MSTX if it manages to break out above that key downtrend line that will trigger over resistance at 52 to 55 cents per 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 1.20 million shares. If that breakout materializes soon, then MSTX will set up to re-test or possibly take out its next major overhead resistance levels at 57 to 62 cents per share, or even its 52-week high of 73 cents per share.

Traders can look to buy MSTX off weakness to anticipate that breakout and simply use a stop that sits right below those bottoming levels at 47 to 46 cents per share. One can also buy MSTX 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.

Marinus Pharmaceuticals


My final breakout trading prospect is clinical-stage biopharmaceutical player Marinus Pharmaceuticals  (MRNS), which focuses on developing and commercializing neuropsychiatric therapeutics. This stock has been hit lower by the bears over the last three months, with shares off by 20%.

If you look at the chart for Marinus Pharmaceuticals, you'll notice that this stock spiked sharply higher on Thursday after breaking below some near-term support at around $8.70 a share, and in the face of a total market selloff. This rip to the upside showed that shares of MRNS were displaying relative strength and it's now pushing the stock within range of triggering a major breakout trade above a key downtrend line that dates back to last December.

Traders should now look for long-biased trades in MRNS if it manages to break out over that major downtrend line that will trigger above some near-term resistance levels at $9.90 to $10 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 42,597 shares. If that breakout gets set off soon, then MRNS will set up to re-test or possibly take out its next major overhead resistance levels at $11 to $12 a share, or even $13 to $14 a share.

Traders can look to buy MRNS off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $8 to $7.80 a share. One can also buy MRNS 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.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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