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.

Matador Resources


One independent energy player that's starting to rebound quickly within range of triggering a big breakout trade is Matador Resources  (MTDR - Get Report) , which  engages in the exploration, development, production, and acquisition of oil and natural gas resources in the U.S. This stock has been slammed lower by the bears over the last three months, with shares off sharply by 46.8%.

If you take a look at the chart for Matador Resources, you'll notice that this stock has been downtrending badly over the last three months and change, with shares collapsing off its high of $28.25 a share to its new 52-week low of $13.15 a share. During that downtrend, shares of Matador Resources have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock might have reached a short-term capitulation, since it ripped higher on Thursday right off that 52-week low with massive upside volume. That high-volume spike to the upside is now quickly pushing shares of Matador Resources within range of triggering a big breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in Matador Resources if it manages to break out above some near-term overhead resistance levels at around $14.60 to $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 1.42 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 $16 to its 20-day moving average of $18.35, or possibly even $20 a share.

Traders can look to buy Matador Resources off weakness to anticipate that breakout and simply use a stop that sits right below its new 52-week low of $13.15 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.

Flamel Technologies


A specialty pharmaceutical player that's starting to spike within range of triggering a big breakout trade is Flamel Technologies  (FLML) , which  develops and commercializes pharmaceutical products based on its proprietary polymer based technology primarily in the U.S. and Europe. This stock has been hit hard by the sellers over the last three months, with shares down big by 44%.

If you take a glance at the chart for Flamel Technologies, you'll see that this stock has been downtrending badly for the last four months, with shares coming completely apart from its high of $24.95 a share to its new 52-week low of $9.61 a share hit on Thursday. During that massive downtrend, this stock has been making mostly lower highs and lower lows, which is bearish technical price action. That move has also pushed shares of Flamel Technologies into extremely oversold territory, since its current relative strength index reading is 32. Oversold can always get more oversold, but it's also an area where a stock can make a powerful bounce higher from. Shares of Flamel Technologies might have started that bounce, since it ripped higher on Thursday with heavy upside volume.

Traders should now look for long-biased trades in Flamel Technologies if it manages to break out above some near-term overhead resistance at basically $10.70 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 331,833 shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11.50 to its 20-day moving average of $12.77, or even its 50-day moving average of $13.90 a share.

Traders can look to buy Flamel Technologies off weakness to anticipate that breakout and simply use a stop that sits right below its new 52-week low of $9.61 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.

Acceleron Pharma


Another clinical stage biopharmaceutical player that's starting to trend within range of triggering a near-term breakout trade is Acceleron Pharma  (XLRN - Get Report) , which focuses on the discovery, development, and commercialization of protein therapeutics for cancer and rare diseases. This stock has been on a mission to the upside over the last three months, with shares soaring higher by a whopping 57.4%.

If you take a glance at the chart for Acceleron Pharma, you'll notice that this stock has been downtrending over the last month, with shares falling sharply lower off its 52-week high of $50.86 a share to Thursday's intraday low of $32.04 a share with heavy downside volume flows. During that downtrend, this stock has been consistently making lower highs and lower lows, which is bearish technical price action. That trend to the downside also pushed shares of Acceleron Pharma back below both its 20-day moving average of $42.45 a share and its 50-day moving average of $40.79 a share. That said, this stock has now started to rebound off its 200-day moving average of $32.94 a share with strong volume, and it's beginning to move within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in Acceleron Pharma if it manages to break out above some key near-term overhead resistance levels at $35.47 to $36 a share and then above more resistance near $37 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 340,539 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 its 50-day moving average of $40.79 a share or its 20-day moving average of $42.45 a share, or even $46 a share.

Traders can look to buy Acceleron Pharma off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $32 a share or near more support at $30 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.

Ardelyx


Another biotechnology player that's quickly spiking within range of triggering a big breakout trade is Ardelyx  (ARDX - Get Report) , which discovers, develops, and commercializes minimally-systemic small molecule therapeutics for the gastrointestinal tract to treat cardio-renal, GI, and metabolic diseases. This stock has been smacked lower by the bears over the last three months, with shares falling sharply by 43.5%.

If you take a glance at the chart for Ardelyx, you'll notice that this stock recently gapped-down sharply lower from over $16 a share to $9.17 a share with heavy downside volume flows. Following that move, shares of Ardelyx have now started to rebound higher off that $9.17 low with a number of strong upside volume days. On Thursday, this stock ripped sharply higher off its intraday low of $9.43 with volume of 434,000 shares, which is well above its three-month average action of 209,660 shares. This high-volume spike is now quickly pushing 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 Ardelyx if it manages to break out above some near-term overhead resistance levels at $10.81 to $11.29 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 209,660 shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its gap-down-day high of $12.36 a share. Any high-volume move above $12.36 will then give this stock a chance to re-fill some of its previous gap-down-day zone that started near $16 a share.

Traders can look to buy Ardelyx off weakness to anticipate that breakout and simply use a stop that sits just below Thursday's intraday low of $9.43 a share or near that recent low of $9.17 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.

ConforMIS


My final breakout trading idea is medical technology player ConforMIS  (CFMS - Get Report) , which develops, manufactures, and sells customized joint replacement implants. This stock has been under heavy selling pressure over the last three months, with shares off sharply by 27.3%.

If you look at the chart for ConforMIS, you'll notice that this stock has been downtrending badly over the last month and change, with shares dropping sharply lower off its high of $22.60 a share to its new 52-week low of $12.28 a share hit on Thursday. During that downtrend, this stock has been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ConforMIS ripped sharply higher on Thursday off that $12.28 low with monster upside volume flows. Volume for that day registered over 1.35 million shares, which is well above its three-month average action of just 277,398 shares. This high-volume spike to the upside is now quickly pushing 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 ConforMIS if it manages to break out above Thursday's intraday high of $14.52 a share and then above more key near-term overhead resistance at $15 a share with volume that registers near or above its three-month average action of 277,398 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 $16 to its 20-day moving average of $16.76, or even $18 to its 50-day moving average of $19.36 a share.

Traders can look to buy shares of ConforMIS off weakness to anticipate that breakout and simply use a stop that sits right below its new 52-week low of $12.28 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.