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.

Alliance Fiber Optic Products

One technology player that's starting to move within range of triggering a big breakout trade is Alliance Fiber Optic Products  (AFOP) , which designs, manufactures and markets various fiber optic components and integrated modules for communications equipment manufacturers and service providers in North America, Europe, and Asia. This stock has been smacked lower by the sellers over the last six months, with shares off by 26%.

If you take a look at the chart for Alliance Fiber Optic Products, you'll notice that this stock recently gapped-down sharply lower from around $18 a share to its recent low of $13.31 a share with massive downside volume flows. Following that move, this stock has now started to trend sideways and consolidate with shares moving between $13.31 on the downside and Thursday's intraday high of $14.52 on the upside. Shares of Alliance Fiber Optic Products broke out on Thursday above some near-term resistance at $14.50 a share with above-average volume. That high-volume move to the upside is now quickly pushing this stock within range of triggering a major breakout trade.

Traders should now look for long-biased trades in Alliance Fiber Products if it manages to break out above some key near-term overhead resistance levels at its 20-day moving average of $14.75 to its gap-down-day high of $15.25 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 229,418 shares. If that breakout materializes soon, then this stock will set up to re-fill some of its recent gap-down-day zone that started at $18.05 a share.

Traders can look to buy Alliance Fiber Optic Products off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $13.60 or at $13.31 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.

Quad Graphics

A business services player that's starting to spike within range of triggering a major breakout trade is Quad Graphics  (QUAD - Get Report) , which provides print and media solutions in the U.S., Europe and Latin America. This stock has been under heavy selling pressure over the last six months, with shares down large by 55.1%.

If you take a glance at the chart for Quad Graphics, you'll notice that this stock recently gapped-down sharply lower from over $13 a share to under $10 a share with heavy downside volume flows. Following that move, shares of Quad Graphics went on to print a new 52-week low of $8.81 a share. This stock has now started to rebound a bit off that $8.81 low and it has broken out above some near-term overhead resistance at $9.36 a share. That move is now starting to push this stock within range of triggering a much bigger breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in Quad Graphics if it manages to break out above some near-term overhead resistance levels at Thursday's intraday high of $9.50 a share and then once it clears more key resistance levels at $10 to around $10.50 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 274,871 shares. If that breakout gets set off soon, then this stock will set up to re-fill some of its gap-down-day zone from a few weeks ago that started just over $13 a share.

Traders can look to buy Quad Graphics off weakness to anticipate that breakout and simply use a stop that sits right below its new 52-week low of $8.81 a share. One could 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.

Emerge Energy Services LP


Another energy player that's starting to trend within range of triggering a big breakout trade is Emerge Energy Services LP  (EMES) , which acquires, owns, operates, and develops a portfolio of energy service assets in the U.S. This stock has been absolutely destroyed by the bears over the last six months, with shares plunging lower by 86.1%.

If you take a glance at the chart for Emerge Energy Services LP, you'll notice that this stock has been making higher lows over the last month or so, after it bounced hard to the upside coming out of a massive downtrend over the previous five months. Shares of Emerge Energy Services LP have also attempted to carve out a double bottom chart pattern over the last few weeks, with shares finding some buying interest at $4.82 to $5.07 a share. This stock is now starting to bounce higher right above those support levels and it's quickly moving 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 Emerge Energy Services LP if it manages to break out above its 20-day moving average of $5.41 a share and then once it clears more key resistance levels at $5.97 to $6.25 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 847,197 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 $7 to $7.28, or even its 50-day moving average of $7.86 to $8.28 a share.

Traders can look to buy Emerge Energy Services LP off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $4.82 a share. One can 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.

Freshpet


Another consumer goods player that's quickly moving within range of triggering a major breakout trade is Freshpet  (FRPT - Get Report) , which manufactures and markets natural fresh foods, refrigerated meals and treats for dogs and cats in the U.S. and Canada. This stock has been annihilated by the bears over the last six months, with shares off huge by 67.5%.

If you take a glance at the chart for Freshpet, you'll see that this stock recently gapped-down sharply lower from around $9 a share to its new all-time low of $5.89 a share with massive downside volume flows. That high-volume move to the downside has now pushed shares of Freshpet into extremely oversold territory, since its current relative strength index reading is 23.6. Oversold can always get more oversold, but it's also an area where a stock can make a powerful bounce higher from. Shares of Freshpet broke out on Thursday above some near-term overhead resistance at $6.40 a share with strong upside volume flows. That high-volume move is now quickly pushing this stock within range of triggering another major breakout trade.

Traders should now look for long-biased trades in Freshpet if it manages to break out above Thursday's intraday high of $6.61 with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 598,958 shares. If that breakout develops soon, then this stock will set up to re-fill some of its previous gap-down-day zone that start near $9 a share.

Traders can look to buy Freshpet off weakness to anticipate that breakout and simply use a stop that sits right below its new all-time low of $5.89 a share. One can also buy this stock off strength once it starts to move above Thursday's intraday high of $6.61 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Aimmune Therapeutics


My final breakout trading prospect is clinical-stage biopharmaceutical player Aimmune Therapeutics  (AIMT) , which engages in the development of desensitization treatments for peanut and other food allergies. This stock has trended off notably over the last six months, with shares down by 17.9%.

If you look at the chart for Aimmune Therapeutics, you'll notice that this stock has been uptrending strong over the last month, with shares moving higher off its all-time low of $14.40 a share to its recent high of $20.17 a share. During that uptrend, shares of Aimmune Therapeutics have been making mostly higher lows and higher highs, which is bullish technical price action. That strong uptrend has now quickly pushed this stock within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Aimmune Therapeutics if it manages to break out above some key near-term overhead resistance levels at $20 to $20.17 a share and then above more resistance at $20.60 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 238,982 shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $23 to $26 a share.

Traders can look to buy shares of Aimmune Therapeutics off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $18 a share or around its 20-day moving average of $17.24 a share. One can 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 conformable percentage from your entry point.

 

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