Updated with additional comments on Twitter from Jack Mohr.

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.

Horsehead Holdings

One basic materials player that's starting to move within range of triggering a big breakout trade is Horsehead Holdings  (ZINC) , which produces and sells zinc and nickel-based products primarily in the U.S. and Canada. This stock has been destroyed by the sellers over the last six months, with shares collapsing 81%.

If you take a look at the chart for Horsehead Holdings, you'll notice that this stock has been downtrending badly over the last two months, with shares falling sharply off its high of $6.02 a share to its recent low of $1.93 a share. During that downtrend, shares of Horsehead Holdings have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to rebound off that $1.93 low and it's quickly moving within range of triggering a big breakout trade.

Traders should now look for long-biased trades in Horsehead Holdings if it manages to break out above some key near-term overhead resistance levels at $2.45 to $2.66 a share and then above more resistance at $2.81 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 2.32 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 its 50-day moving average of $3.09 to $3.12, or even $3.21 to $3.95 a share.

Traders can look to buy Horsehead Holdings off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $2.20 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.

Pioneer Energy Services


A energy player that's starting to trend within range of triggering a big breakout trade is Pioneer Energy Services  (PES) , which provides drilling services and production services to oil and gas exploration and production companies in the U.S. and Colombia. This stock has been smashed lower by the sellers over the last six months, with shares down big by 61.9%.

If you take a glance at the chart for Pioneer Energy Services, you'll notice that this stock has been consolidating and trending sideways over the last two months, with shares moving between $2.13 on the downside and $3.09 on the upside. Shares of Pioneer Energy Services have now started to spike a bit higher right above that range low of $2.13 a share. That move is starting to push this stock within range of triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern.

Traders should now look for long-biased trades in Pioneer Energy Services if it manages to break out above some near-term overhead resistance levels at $2.77 to $3.04 a share and then above more key resistance at $3.09 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 1.19 million 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 $3.49 to $3.87, or even $4.13 to $4.50 a share.

Traders can look to buy Pioneer Energy Services off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $2.40 a share or near $2.13 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.

DBV Technologies


Another clinical-stage biopharmaceutical player that's starting to move within range of triggering a near-term breakout trade is DBV Technologies  (DBVT) , which engages in the research and development of epicutaneous immunotherapy products. This stock has been moving strong to the upside over the last six months, with shares sharply higher by 42%.

If you take a glance at the chart for DBV Technologies, you'll notice that this stock has been consolidating and trending sideways over the last month, with shares moving between $33.42 on the downside and $37.30 on the upside. Shares of DBV Technologies have now started to spike a bit higher off that $33.42 low and it's starting to flirt with both its 50-day moving average of $35.13 a share and its 20-day moving average of $35.28 a share. This stock is now starting to move within range of triggering a near-term breakout trade above the upper-end of its recent sideways trending chart pattern.

Traders should now look for long-biased trades in DBV Technologies if it manages to break out above some key near-term overhead resistance levels at $36.71 to $37.22 a share and then above more resistance at $37.30 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 184,444 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 $39.84 to $42, or even $43.23 to $44.63 a share.

Traders can look to buy DBV Technologies off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $33.42 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.

Tetraphase Pharmaceuticals

Another clinical-stage biopharmaceutical player that's starting to trend within range of triggering a big breakout trade is Tetraphase Pharmaceuticals  (TTPH) , which develops various antibiotics for the treatment of serious and life-threatening multi-drug resistant infections. This stock has been smacked lower by the bears over the last six months, with shares falling sharply by 74.5%.

If you take a glance at the chart for Tetraphase Pharmaceuticals, you'll see that this stock has been uptrending strong over the last two months, with shares moving higher off its low of $7.20 a share to its recent high of $12.45 a share. During that uptrend, shares of Tetraphase Pharmaceuticals have been making mostly higher lows and higher highs, which is bullish technical price action. That strong uptrend has now pushed 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 Tetraphase Pharmaceuticals if it manages to break out above some key near-term overhead resistance levels at $11.81 to $12.45 a share and then above some past resistance at $12.84 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 2.19 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 September that started near $45a share.

Traders can look to buy Tetraphase Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $10.21 to its 50-day moving average of $9.77 a share or even around more support at $9.50 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.

Twitter


My final breakout trading prospect is social media player Twitter  (TWTR) , which operates as a global platform for public self-expression and conversation in real time. This stock has been under heavy selling pressure over the last six months, with shares falling sharply by 30.8%.

If you look at the chart for Twitter, you'll notice that this stock has been consolidating and trending sideways over the last few weeks, with shares moving between $24.90 on the downside and $26.69 on the upside. This sideways consolidation is coming after shares of Twitter dropped notably off its October high of $31.87 a share. Any high-volume move above the upper-end of its recent sideways trending chart pattern could easily trigger a big breakout trade for shares of Twitter.

Traders should now look for long-biased trades in Twitter if it manages to break out above some near-term overhead resistance levels at its 20-day moving average of $25.97 a share and then above $26.69 a share and over its 50-day moving average of $27.72 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 20.65 million 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 $30.15 to $31.87 a share.

Traders can look to buy shares of Twitter off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $24.90 a share or around $24.34 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.

Twitter is a holding in the Action Alerts PLUS charitable trust portfolio, co-managed by TheStreet's Jim Cramer and Jack Mohr. Here's what Mohr has to say about the stock from a fundamental perspective:

"There is no doubt that Twitter possesses a powerful (live) content distribution platform, one which boasts 320 million monthly active users. The most important growth levers for the company are market share, users and engagement. These three components are essential pillars of Twitter's overall value proposition as it competes for advertising dollars against established titans such as Facebook and Google. So far, many advertisers have struggled to both understand and measure the success of ad campaigns, which is a direct reflection of the company's inability to effectively articulate its value proposition, lest define its own corporate vision."

"Twitter has tremendous potential, says Mohr, "but until recent strategic actions are reflected in the results, we consider it a 'show-me' story."

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Disclosure: 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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