5 Stocks Ready for Breakouts: Must-See Charts

 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.

Cinedigm


One entertainment stock that's starting to move within range of triggering a big breakout trade is Cinedigm  (CIDM), which distributes independent movie, television and other short form content in the U.S. This stock has been hammered lower by the sellers over the last three months, with shares down big by 47%.

If you take a look at the chart for Cinedigm, you'll notice that this stock recently fell sharply from its April high of $1.36 a share to its new 52-week low of 77 cents per share. During that sharp move to the downside, shares of CIDM have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of CIDM have now started to rebound off that 77 cents per share with strong upside volume flows. That rebound is now quickly pushing shares of CIDM 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 CIDM if it manages to break out above some near-term overhead resistance levels at 92 to 95 cents per share and then above more resistance at $1 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 497,477 shares. If that breakout materializes soon, then CIDM will set up to re-test or possibly take out its next major overhead resistance levels at $1.20 to its 50-day moving average of $1.28 a share, or even $1.40 a share.

Traders can look to buy CIDM off weakness to anticipate that breakout and simply use a stop that sits right around some near-term support levels 85 to 83 cents per share. One can also buy CIDM 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.

Hortonworks

A enterprise software player that's quickly moving within range of triggering a big breakout trade is Hortonworks  (HDP), which focuses on the development, distribution and support of Hadoop open source project in the U.S. and internationally. This stock has been under some selling pressure over the last six months, with shares sliding to the downside by 11.3%.

If you take a glance at the chart for Hortonworks, you'll notice that this stock ripped sharply higher on Thursday back above its 50-day moving average of $21.97 with strong upside volume flows. Volume on the day registered over 700,000 shares, which is well above its three-month average volume of 381,028 shares. This strong spike to the upside has now started to push shares of HDP within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in HDP if it manages to break out above a key downtrend line that will trigger over resistance levels at $23.99 to $24.91 a share and then above more resistance at $25.31 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 381,028 shares. If that breakout triggers soon, then HDP will set up to re-test or possibly take out its next major overhead resistance levels at $28 to $29 a share, or even its all-time high of $29.83 a share. Any high-volume move above that all-time high will then give HDP a chance to trend north of $30 a share.

Traders can look to buy HDP off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $21.97 a share. One could also buy HDP 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.

Opower


Another stock that's starting to trend within range of triggering a big breakout trade is Opower  (OPWR), which provides cloud-based software to the utility industry in the U.S. This stock has been smacked lower by the bears over the last six months, with shares down large by 28.5%.

If you take a glance at the chart for Opower, you'll see that this stock recently formed a double bottom chart pattern at $9.69 to $9.65 a share. Following that bottom, shares of OPWR have now started to uptrend, with the stock advancing up from that $9.65 low to its recent high of $11.90 a share. During that uptrend, shares of OPWR have been making mostly higher lows and higher highs, which is bullish technical price action. That trend has now pushed shares of OPWR within range of triggering a major breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in OPWR if it manages to break out above some key near-term overhead resistance levels at $11.90 to $12 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 279,987 shares. If that breakout develops soon, then OPWR will set up to re-test or possibly take out its next major overhead resistance level at its gap-down-day high from March at $13 a share. Any high-volume move over $13 will then give OPWR a chance to re-fill some of its previous gap-down-day zone that started at $15.50 a share.

Traders can look to buy OPWR off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $11 a share or around its 50-day moving average of $10.27 a share. One can also buy OPWR 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.

Anthera Pharmaceuticals


A biopharmaceutical player that's starting to move within range of triggering a near-term breakout trade is Anthera Pharmaceuticals  (ANTH), which focuses on developing and commercializing medicines for patients with unmet medical needs. This stock has been on fire over the last six months, with shares sharply to the upside by 177.9%.

If you take a glance at the chart for Anthera Pharmaceuticals, you'll notice that this stock has been uptrending over the last month or so, with shares moving higher from its low of $4.05 to its intraday high on Thursday of $5.10 a share. During that uptrend, shares of ANTH have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of ANTH ripped to the upside on Thursday right off its 50-day moving average of $4.63 a share. That move is now starting to push shares of ANTH within range of triggering a near-term breakout trade above a key downtrend line.

Traders should now look for long-biased trades in ANTH if it manages to break out above a key downtrend line that will start to trigger over resistance at $5.20 to $5.33 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 1.03 million shares. If that breakout gets underway soon, then ANTH will set up to re-test or possibly take out its next major overhead resistance levels at around $6 to its 52-week high of $6.37 a share. Any high-volume move above $6.37 will then give ANTH a chance to trend towards $7 a share.

Traders can look to buy ANTH off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $4.63 a share or down near more support at $4.26 a share if you want to give it more room. One can also buy ANTH 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.

Skyworks Solutions

My final breakout trading prospect is semiconductor player Skyworks Solutions  (SWKS), which designs, develops, manufactures and markets analog and mixed signal semiconductors worldwide. This stock has been red hot over the last six months, with shares moving sharply to the upside by 56.8%.

If you look at the chart for Skyworks Solutions, you'll notice that this stock has been consolidating and trending sideways over the last month and change, with shares moving between $88.13 on the downside and $102.63 on the upside. Shares of SWKS jumped higher on Thursday right above its 50-day moving average of $96.08 a share. That modest trend higher is now starting to push shares of SWKS within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in SWKS if it manages to break out above a key downtrend line that will start to trigger over $99.34 to $100.43 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 4.42 million shares. If that breakout hits soon, then SWKS will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $102.77 a share. Any high-volume move above that level then give SWKS a chance to trend towards $105 to $110 a share, or even $115 to $120 a share.

Traders can look to buy SWKS off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $96.08 a share or near more support at $92.21 a share. One can also buy SWKS 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.

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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