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.

Alphatec

One stock that's starting to spike within range of triggering a big breakout trade is Alphatec  (ATEC) , which focuses on the design, development, manufacturing and marketing of products for the surgical treatment of spine disorders worldwide. This stock has been destroyed by the sellers over the last six months, with shares plunging lower by a whopping 83.3%.

If you take a look at the chart for Alphatec, you'll notice that this stock recently formed a major bottoming chart pattern, since shares found some buying interest at 21 to 22 cents per share. This potential bottom is coming after shares of Alphatec dropped sharply off its August higher of over $1.20 a share to its new 52-week low of 21 cents per share. This stock trended notably higher on Thursday right off its 20-day moving average of 23 cents per share with heavy upside volume. Volume for the day registered over 779,000 shares, which is well above its three-month average action of 315,444 a shares. That high-volume spike to the upside is now quickly pushing this name 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 Alphatec if it manages to break out above some key near-term overhead resistance levels at 26 cents to 28 cents per share and then above its 50-day moving average at around 29 cents per 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 315,444 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 37 to 39 cents, or even 45 cents to 53 cents per share.

Traders can look to buy Alphatec off weakness to anticipate that breakout and simply use a stop that sits just below those major near-term support levels at 22 cents to 21 cents per 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.

Agios Pharmaceuticals


Another stock that's starting to rebound within range of triggering a big breakout trade is biopharmaceutical player Agios Pharmaceuticals  (AGIO) , which focuses on the development and commercialization of therapeutics in the field of cancer metabolism and rare genetic disorders of metabolism in the U.S. This stock has been hammered lower by the bears over the last six months, with shares down big by 54.9%.

If you take a glance at the chart for Agios Pharmaceuticals, you'll see that this stock recently gapped-down sharply lower from over $60 a share to its new 52-week low of $48 a share with heavy downside volume flows. Following that move, shares of Agios Pharmaceuticals have started to rebound sharply off that $48 low with some decent upside volume flows. That sharp rebound is now quickly pushing this stock within range of triggering a big breakout trade above some near-term overhead resistance.

Traders should now look for long-biased trades in Agios Pharmaceuticals if it manages to break out above some near-term overhead resistance at around $55 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 674,306 shares. If that breakout fires off soon, then this stock will set up to re-fill some of its recent gap-down-day zone that started above $60 a share. If that gap gets filled with strong upside volume flows, then this stock could easily tag its 50-day moving average of $67.24 a share.

Traders can look to buy Agios Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right below Thursday's intraday low of $51.91 a share or around $50 a share. One could also buy this stock off strength once it starts to bust above $55 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Inotek Pharmaceuticals


Another clinical-stage biopharmaceutical player that's starting to move within range of triggering a big breakout trade is Inotek Pharmaceuticals  (ITEK) , which focuses on the discovery, development and commercialization of therapies for glaucoma. This stock has been on fire over the last six months, with shares soaring sharply higher by 93.4%.

If you take a glance at the chart for Inotek Pharmaceuticals, you'll notice that this stock has recently formed a double bottom chart pattern, after shares found some buying interest over the last few weeks at $10.05 to $10.01 a share. This stock ripped sharply higher on Thursday right above those support levels and back above both its 50-day moving average of $10.77 a share and its 20-day moving average of $10.99 a share. This move is now quickly pushing Inotek Pharmaceuticals within range of triggering a big breakout trade above a key downtrend line that dates back to September.

Traders should now look for long-biased trades in Inotek Pharmaceuticals if it manages to clear that downtrend line which will start to take shape over some near-term resistance levels at $12 to $12.41 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 257,675 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 $13.36 to around $16 a share.

Traders can look to buy Inotek Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $10.77 a share or near those double bottom support levels. 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.

Valeant Pharmaceuticals


Another health care stock that's starting to spike within range of triggering a major breakout trade is Valeant Pharmaceuticals  (VRX) , which develops, manufactures and markets pharmaceuticals, over-the-counter products, and medical devices worldwide. This stock has been slammed lower by the the bears over the last six months, with shares down large by 57.5%.

If you take a glance at the chart for Valeant Pharmaceuticals, you'll see that this stock has been uptrending strong over the last month or so, with shares ripping higher off its new 52-week low of $69.33 a share to its recent high of $101.93 a share. During that uptrend, shares of Valeant Pharmaceuticals have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed 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 Valeant Pharmaceuticals if it manages to break out above some near-term overhead resistance levels at Thursday's intraday high of $97.45 a share and then above more key resistance at $100 to $101.93 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 14.81 million 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 $104.80 to $110, or even its 50-day moving average of $114.19 to $127 a share.

Traders can look to buy Valeant Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right below Thursday's intraday low of $93.26 or around more near-term support levels at $89 to $87 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.

Spectranetics


My final breakout trading prospect is Spectranetics  (SPNC) , which develops, manufactures, markets and distributes single-use medical devices used in minimally invasive procedures in the cardiovascular system. This stock has been under heavy selling pressure over the last six months, with shares off sharply by 46.5%.

If you look at the chart for Spectranetics, you'll notice that this stock has been uptrending strong over the last two months and change, with shares ripping higher off its new 52-week low of $10.65 a share to its recent high of close to $14.75 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. Shares of Spectranetics ripped higher on Thursday right above some near-term support at $13.12 a share and back above its 20-day moving average of $13.70 a share with above-average volume. Volume on the day registered over 788,000 shares, which is well above its three-month average action of 688,372 a shares. This high-volume spike is now quickly pushing this stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in Spectranetics if it manages to break out above some near-term overhead resistance levels at $14.75 to around $15 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 688,372 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 $16 to $16.63, or even $17.63 to $18.39 a share.

Traders can look to buy shares of Spectranetics off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $13.12 a share or around its 50-day moving average of $12.78 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.

 

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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