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.

Amarin


One biopharmaceutical stock that's starting to trend within range of triggering a big breakout trade is Amarin (AMRN), which focuses on developing and commercializing therapeutics for the treatment of cardiovascular diseases in the U.S. This stock has been on fire over the last six months, with shares up huge by 121%.

If you take a look at the chart for Amarin, you'll see that this stock has been attempting to carve out a major bottom over the last month and change, with shares finding buying interest at $2.29, $2,28 and $2.26 a share. This stock has now started to bounce to the upside right above those support levels and right off its 50-day moving average of $2.22 a share. That bounce is now starting to push this stock within range of triggering a big breakout trade above a key downtrend line that dates back to March.

Traders should now look for long-biased trades in Amarin if it manages to break out above some key near-term overhead resistance levels at $2.55 to $2.65 a share and then above more resistance at $2.80 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 2.22 million shares. If that breakout materializes soon, then this stock will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $3.33 a share.

Traders can look to buy Amarin off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $2.22 a share. 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.

Verastem


Another biopharmaceutical stock that's starting to trend within range of triggering a near-term breakout trade is Verastem  (VSTM), which focuses on discovering and developing proprietary small-molecule drugs targeting cancer stem cells. This stock has been smashed lower by the sellers over the last three months, with shares off sharply by 30.5%.

If you take a glance at the chart for Verastem, you'll see that this stock has been downtrending badly over the last four months and change, with shares falling sharply lower from its high of $12.35 to its recent low of $6.80 a share. During that downtrend, shares of Verastem have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock bounced to the upside on Thursday right off some past support at around $6.78 a share from February. That bounce could be marking a major bottom, and now shares of Verastem are starting to trend within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in Verastem if it manages to break out above some near-term overhead resistance levels at $7.50 to $7.71 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 332,732 shares. If that breakout kicks 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 $8.17 to $8.38 a share, or even its 200-day moving average of $8.80 a share to over $9 a share.

Traders can look to buy Verastem off weakness to anticipate that breakout and simply use a stop that sits right below that February low of $6.78 a share. One could also buy this stock 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.

Constant Contact


Another stock that's starting to trend within range of triggering a major breakout trade is Constant Contact  (CTCT), which provides online marketing tools that are designed for small organizations worldwide. This stock has been hit lower by the sellers over the last three months, with shares moving to the downside by 23.2%.

If you take a glance at the chart for Constant Contact, you'll notice that this stock ripped sharply to the upside on Thursday right off its 50-day moving average of $28.66 a share and back above its 20-day moving average of $29.16 a share with decent upside volume flows. This move is now quickly pushing shares of Constant Contact 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 Constant Contact if it manages to break out above some key near-term overhead resistance at around $30.50 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 506,843 shares. If that breakout triggers soon, then this stock will set up to re-fill some of its previous gap-down-day zone from April that started near $36 a share.

Traders can look to buy Constant Contact off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $28.66 a share. One can also buy this stock off strength once it starts to trend above that breakout level with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Kite Pharma


Another stock that's starting to move within range of triggering a major breakout trade is Kite Pharma  (KITE), which focuses on the development and commercialization of novel cancer immunotherapy products. This stock has trended up a bit over the last three months, with shares higher by 8.9%.

If you take a glance at the chart for Kite Pharma, you'll notice that this stock has been uptrending very strong over the last two months and change, with shares moving higher from its low of $45.36 to its recent high of $66.70 a share. During that uptrend, shares of Kite Pharma have been consistently making higher lows and higher highs, which is bullish technical price action. This stock ripped higher on Thursday right off its 20-day moving average of $61.34 a share and that move is now quickly pushing shares of Kite Pharma within range of triggering a major breakout trade.

Traders should now look for long-biased trades in Kite Pharma if it manages to break out above some near-term overhead resistance levels at $65 to $66.70 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 1.25 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 levels at $77.70 to $85 a share.

Traders can look to buy Kite Pharma off weakness to anticipate that breakout and simply use a stop that sits right around $60 a share or near its 50-day moving average of $57.13 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 comfortable percentage from your entry point.

Glaukos


My final breakout trading prospect is health care player Glaukos  (GKOS), which develops and commercializes products and procedures designed for the treatment of glaucoma. This stock is down a bit over the last month, with shares off by 3.1%.

If you look at the chart for Glaukos, you'll notice that this stock has been making mostly higher lows and higher highs over the last few weeks since this company came public, which is bullish technical price action. That uptrend has now started to push shares of Glaukos within range of triggering a major breakout trade that could push the stock into new all-time-high territory.

Traders should now look for long-biased trades in Glaukos if it manages to break out above some near-term overhead resistance levels at $31 to $32 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 1.02 million shares. If that breakout hits soon, then this stock will set up to enter new all-time-high territory above $32 a share, which is bullish technical price action. Some possible upside targets off that move are $35 to $40 a share.

Traders can look to buy Glaukos off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $29 a share or at $28 a share. 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 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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