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.

Engility



One staffing and outsourcing services player that's starting to trend within range of triggering a major breakout trade is Engility  (EGL), which provides various engineering, technical, analytical, advisory, training, logistics, and support services worldwide. This stock has been hit by the sellers over the last six months, with shares off by 24.2%.

If you take a look at the chart for Engility, you'll see that this stock has been downtrending badly for the last four months, with shares dropping sharply lower from its high of $49 to its recent low of $22.64 a share. During that downtrend, shares of Engility have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to bounce off that $22.64 low with monster upside volume flows. That bounce is now pushing this stock within range of triggering a major breakout trade.

Traders should now look for long-biased trades in Engility if it manages to break out above a key downtrend line that will trigger over its 50-day moving average of $28.65 and then above more near-term overhead resistance at $30.30 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 174,611 shares. If that breakout materializes soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $32.64 to $35.26 a share, or even its 200-day moving average of $36.32 a share.

Traders can look to buy Engility off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $26.63 a share. One can also buy this stock 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.

FibroGen


A research-based biopharmaceutical player that's quickly moving within range of triggering a big breakout trade is FibroGen  (FGEN), which discovers, develops, and commercializes therapeutic agents to treat serious unmet medical needs. This stock has been smacked lower by the sellers over the last six months, with shares falling sharply by 31.4%.

If you take a glance at the chart for FibroGen, you'll notice that this stock has recently formed a double bottom chart pattern at $17.04 to $16.95 a share. That double bottom is coming after shares of FibroGen dropped sharply from its March high of $32.79 to its June low of $16.95 a share. This stock has now started to rebound sharply to the upside off that $16.95 low and it's beginning to push 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 FibroGen if it manages to break out above some near-term overhead resistance levels at $20 to $20.92 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 407,050 shares. If that breakout gets set off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $23.68 to $24.77 a share. Any high-volume move above those levels will then give FibroGen a chance to tag $28 a share.

Traders can look to buy FibroGen off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $18.05 a share.. One could also buy this stock 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.

Shopify

Another application software player that 's starting to spike within range of triggering a major breakout trade is Shopify  (SHOP), which provides a cloud-based commerce platform for small and medium-sized businesses. This stock is off to a strong IPO debut this month, with shares up sharply by 19.6%.

If you take a glance at the chart for Shopify, you'll notice that this stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $25.51 to its intraday high on Thursday of $30.73 a share. During that uptrend, shares of Shopify have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now quickly pushing shares of Shopify within range of triggering a major breakout trade above its all-time high since this company came public in May.

Traders should now look for long-biased trades in Shopify if it manages to break out above its all-time high of $31.10 a share with high volume. Watch for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.31 million shares. If that breakout triggers soon, then this stock will set up to enter new all-time-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $35 to $40 a share, or even $45 to $50 a share.

Traders can look to buy Shopify off weakness to anticipate that breakout and simply use a stop that sits right around Thursday's intraday low of $28.49 a share. One can also buy this stock off strength once it starts to bust above that breakout level with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Aerie Pharmaceuticals


Another clinical-stage pharmaceutical player that's starting to trend within range of triggering a big breakout trade is Aerie Pharmaceuticals  (AERI), which, focuses on the discovery, development, and commercialization of first-in-class therapies for the treatment of glaucoma and other eye diseases. This stock has been destroyed by the bears over the last three months, with shares falling large to the downside by 53.9%.

If you take a glance at the chart for Aerie Pharmaceuticals, you'll notice that this stock has been uptrending strong over the last month and change, with shares moving higher from its low of $8.84 to its recent high of $13.49 a share. During that uptrend, shares of Aerie Pharmaceuticals have been making mostly higher lows and higher highs, which is bullish technical price action. This spike to the upside on Thursday is now quickly pushing this stock 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 Aerie Pharmaceuticals if it manages to break out above Thursday's intraday high of $13.32 a share and then above some key near-term overhead resistance at $13.49 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 1.09 million shares. If that breakout develops soon, then this stock will set up to re-test or possibly take out its next major overhead resistance level at its gap-down-day high from April of $16.05 a share. Any high-volume move above $16.05 will then give shares of Aerie Pharmaceuticals a chance to re-fill some of that previous gap-down-day zone that started near $35 a share.

Traders can look to buy Aerie Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $12.30 a share. One can also buy this stock 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.

Zhaopin


My final breakout trading prospect is staffing and outsourcing services player Zhaopin  (ZPIN), which provides online recruitment services in the People's Republic of China. This stock has been under some light selling pressure over the last six months, with shares falling to the downside by 8.5%.

If you look at the chart for Zhaopin, you'll notice that this stock recently formed a double bottom chart pattern at $14.52 to $14.50 a share. Following that bottom, shares of Zhaopin ripped to the upside on Thursday back above its 200-day moving average of $15.16 a share and right into its 50-day moving average of $15.61 a share with monster upside volume. Volume on the day registered over 838,000 shares, which is well above its three-month average volume of 118,300 shares. That high-volume spike has now started to push this stock within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in Zhaopin if it manages to break out above that downtrend line that will trigger over its 50-day moving average of $15.61 a share and then above some key near-term overhead resistance levels at $16 to $16.30 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 118,300 shares. If that breakout gets underway soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at around $17.66 to its all-time high of $18.68 a share. Any high-volume move above $18.68 will then give this stock a chance to tag or trend north of $20 a share.

Traders can look to buy Zhaopin off weakness to anticipate that breakout and simply use a stop that sits right below those double bottom support levels, or down near more support at $14.15 a share. One can also buy this stock off strength once it starts to move above 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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