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.

Zulily


A stock that's quickly moving within range of triggering a major breakout trade is Zulily  (ZU), which operates as an online retailer in the U.S., Canada, Australia, the United Kingdom and internationally. This stock has been smacked lower by the sellers over the last six months, with shares dropping sharply by 38.9%.

If you take a look at the chart for Zulily, you'll see that this stock recently formed a major bottoming chart pattern, after shares found buying interest at $12.80 to $13.14 a share. Following that bottom, this stock has now started to uptrend a short-term uptrend, with shares of Zulily making higher lows and higher highs over the last few weeks. This short-term uptrend has now quickly started to push shares of Zulily 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 Zulily if it manages to break out above some key near-term overhead resistance levels at $15.22 to $15.29 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 2.95 million shares. If that breakout develops soon, then this stock will set up to re-fill some of its previous gap-down-day zone from February that started at $20 a share.

Traders can look to buy Zulily off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $13.53 a share, or near those recent double bottom support levels. One can 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.

Authentidate



Another stock that's starting to trend within range of triggering a big breakout trade is Authentidate  (ADAT), which provides Web-based software applications and telehealth products and services in the U.S. This stock has been annihilated by the sellers over the last six months, with shares falling dramatically lower by 76.6%.

If you take a glance at the chart for Authentidate, you'll see that this stock has been making bullish moves to the upside over the last two trading sessions with strong upside volume flows. These prior two upside volume days are the largest overall volume days for shares of Authentidate in over the last six months. This reason spike to the upside for this stock has now started to quickly push shares of Authentidate 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 Authentidate if it manages to break out above some near-term overhead resistance levels at 22 to 23 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 78,019 shares. If that breakout triggers soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at 26 to 27 cents per share. Any high-volume move above those levels will then give shares of Authentidate a chance to tag its next major overhead resistance levels at 33 to 38 cents per share.

Traders can look to buy Authentidate off weakness to anticipate that breakout and simply use a stop that sits right around its recent new 52-week low of 16 cents per share. One could 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.

NephroGenex


Another stock that's starting to trend within range of triggering a big breakout trade is NephroGenex (NRX), which focuses on developing novel therapies for kidney disease. This stock has been ripping to the upside over the last six months, with shares moving sharply higher by 69.8%.

If you take a glance at the chart for NephroGenex, you'll notice that this stock recently formed a major bottoming chart, after shares founding buying interest over the last month and change at $6.59, $6.79 and $7.05 a share. Following that bottom, shares of NephroGenex have now started to spike higher and push back above its 50-day moving average. That has also recently started to push shares of NephroGenex into breakout territory above some key near-term overhead resistance levels at $7.85 to $8.15 a share. Shares of NephroGenex are now quickly starting to trend within range of triggering a much bigger breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in NephroGenex if it manages to break out above some key overhead resistance levels at $9.01 to $9.48 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 34,303 shares. If that breakout gets started soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11 to $13 a share.

Traders can look to buy NephroGenex off weakness to anticipate that breakout and simply use a stop that sits right around those recent major bottoming support levels. One can also buy this stock off strength once it starts to trade above that breakout level with volume and then simply use a stop that sits a comfortable percentage from your entry point.

GenMark Diagnostics



Another stock that's starting to trend within range of triggering a major breakout trade is GenMark Diagnostics (GNMK), which, develops, manufactures, sells and supports instruments and molecular tests based on its proprietary eSensor detection technology in the U.S. This stock has been under selling pressure over the last three months, with shares moving sharply to the downside by 25.7%.

If you take a glance at the chart for GenMark Diagnostics, you'll notice that this stock recently formed a major bottoming chart pattern, after shares of GenMark Diagnostics found significant buying interest each time it traded to right around or just below $9 a share. Following that bottom, shares of GenMark Diagnostics have now started to rebound and that move is beginning to push this stock 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 GenMark Diagnostics if it manages to break out above some key overhead resistance levels at $9.97 to $10.45 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 205,909 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 $11.04 to its 200-day moving average of $11.33 a share. Any high-volume move above those levels will then give this stock a chance to tag its next major overhead resistance level at $13 a share.

Traders can look to buy GenMark Diagnostics off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $9.02 to $8.90 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.


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