Trade These 5 Breakout Stocks for Big Gains

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. These are also the exact type of stocks that I love to trade and alert to my subscribers in real-time. I frequently flag 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.

Plug Power

One alternative energy player that's starting to spike within range of triggering a big breakout trade is Plug Power  (PLUG) , which engages in the design, development, manufacture and commercialization of fuel cell systems for the material handling and stationary power market in the U.S. This stock has been in favor with the bulls over the last three months, with shares up sharply by 24.7%.

If you take a look at the chart for Plug Power, you'll notice that this stock has been attempting to carve out a major bottoming chart pattern over the last two months, with shares finding some buying interest $1.90 to $1.98 a share. Shares of Plug Power jumped notably higher on Thursday back above its 20-day moving average of $2.04 a share and right off its 200-day moving average of $2.07 a share with strong upside volume flows. Volume for that trading session registered over 2.08 million shares, which is well above its three-month average action of 1.98 million shares. This high-volume move to the upside is now quickly pushing shares of Plug Power within range of triggering a big breakout trade.

Traders should now look for long-biased trades in Plug Power if it manages to break out above some key overhead resistance levels at $2.14 to $2.20 a share and then above more resistance levels at $2.25 to $2.35 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 1.98 million 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 $2.65 to its 52-week high of $2.98 a share. Any high-volume move above $2.98 will then give this stock a chance to trend towards its next major resistance level at $3.38 a share.

Traders can look to buy Plug Power off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $2 a share or close to $1.90 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.

Twitter

A social media player that's starting to trend within range of triggering a big breakout trade is Twitter  (TWTR) , which operates as a global platform for public self-expression and conversation in real time. This stock has been crushed by the bears over the last six months, with shares down large by 40.3%.

If you take a glance at the chart for Twitter, you'll notice that this stock recently formed a double bottom chart pattern, after shares found some buying interest at $15.83 to $16.15 a share. Following that potential bottom, shares of Twitter have now started to trend back above its 20-day moving average of $16.64 a share and its 50-day moving average of $16.98 a share. This uptrend is now quickly pushing shares of Twitter within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trade in Twitter if it manages to break out above some near-term overhead resistance levels at $17.83 to around $18 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 24.17 million shares. If that breakout hits soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $19 to $20.32, or even $22 to $23 a share.

Traders can look to buy Twitter off weakness to anticipate that breakout and simply use a stop that sits right around those recent double bottom support levels or near more key support at $15.33 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.

For another technical take on Twitter, check out "Is Twitter About to See a Big Rebound?"

From a fundamental perspective, Twitter is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. The portfolio rates the stock a Three, meaning it would sell shares on strength. Regarding Twitter's winning the rights to live-stream NFL Thursday night games, Cramer and Research Director Jack Mohr wrote last week: "We are encouraged by the deal and by Twitter's clear efforts over the last couple of months to target user growth and improve the product, but we are still skeptical of whether these changes can have any meaningful impact."
 

LinkedIn

Another technology player that's starting to spike within range of triggering a big breakout trade is LinkedIn  (LNKD) , which operates an online professional network worldwide. This stock has been hit hard by the sellers over the last six months, with shares moving lower by 39.6%.

If you take a glance at the chart for LinkedIn, you'll notice that this stock ripped notably higher on Thursday right off its 20-day moving average of $112.59 a share and back above its 50-day moving average of $116.10 a share with decent upside volume flows. Volume for that trading session registered over 3.80 million shares, which is just above its three-month average action of 3.92 million shares. This high-volume spike to the upside is now quickly pushing shares of LinkedIn within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in LinkedIn if it manages to break out above Thursday's intraday high of $118.23 a share and then above more key resistance levels at $119.27 to $122.37 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 3.92 million 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 level at its gap-down-day high from February at around $130 a share. Any high-volume move above $130 a share will then give this stock a chance to re-fill some of its previous gap-down-day zone that started near $200 a share.

Traders can look to buy LinkedIn off weakness to anticipate that breakout and simply use a stop that sits right around its 20-day moving average of $112.59 a share or around more support at $110 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.

Carbylan Therapeutics

A specialty pharmaceutical player that's starting to rip up within range of triggering a major breakout trade is Carbylan Therapeutics  (CBYL) , which focuses on the development and commercialization of novel and proprietary combination therapies. This stock has been destroyed by the bears over the last six months, with shares plunging lower by 82.2%.

If you take a glance at the chart for Carbylan Therapeutics, you'll notice that this stock spiked notably higher on Thursday right off some near-term support at 60 cents per share and back above both its 20-day and 50-day moving averages at 63 cents per share with strong upside volume flows. Volume for that trading session registered over 379,000 shares, which is well above its three-month average action of 276,384 shares. This high-volume jump to the upside is now quickly pushing shares of Carbylan Therapeutics within range of triggering a major breakout trade.

Traders should now look for long-biased trades in Carbylan Therapeutics if it manages to break out above some key near-term overhead resistance levels at 66 cents to 76 cents per 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 276,384 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 gap-down-day high from February at just above $1.25 a share.

Traders can look to buy Carbylan Therapeutics off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at 60 cents to 55 cents per 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.

Tonix Pharmaceuticals

My final breakout trading prospect is clinical-stage pharmaceutical player Tonix Pharmaceuticals  (TNXP) , which focuses on the identification and development of pharmaceutical products for the disorders of central nervous system in the U.S. This stock has been annihilated by the bears over the last six months, with shares trending sharply lower by 59.7%.

If you look at the chart for Tonix Pharmaceuticals, you'll notice that this stock has been uptrending over the last month or so, with shares moving higher off its new 52-week low of $2.20 a share to its recent high of $2.92 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. Shares of Tonix Pharmaceuticals ripped higher on Thursday right off its 20-day moving average of $2.49 a share and briefly above its 50-day moving average of $2.76 a share with decent upside volume flows. This spike to the upside is now quickly pushing shares of Tonix Pharmaceuticals within range of triggering a major breakout trade.

Traders should now look for long-biased trades in Tonix Pharmaceuticals if it manages to break out above some key overhead resistance levels at $2.92 to $2.99 a share with volume that hits near or above its three-month average action of 182,161 shares. If that breakout takes hold soon, then this stock will set up to re-fill some of its previous gap-down-day zone from February that started near $4.09 a share.

Traders can look to buy shares of Tonix Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits right below its 20-day moving average of $2.49 a share or around more key support levels at $2.32 to its new 52-week low of $2.20 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.

More from Opinion

Tesla's Elon Musk Must Realize He Can't Do It All: Dumbest Thing on Wall Street

Tesla's Elon Musk Must Realize He Can't Do It All: Dumbest Thing on Wall Street

5 Things to Watch for When Netflix Reports Earnings on Monday

5 Things to Watch for When Netflix Reports Earnings on Monday

Flashback Friday: Bank Stocks Stay Hot and Tesla Stays Relevant

Flashback Friday: Bank Stocks Stay Hot and Tesla Stays Relevant

Throwback Thursday: Tesla's Risky, Broadcom Slips, Papa John's Jumps

Throwback Thursday: Tesla's Risky, Broadcom Slips, Papa John's Jumps

Apple's 2018 Macs and iPads Could Prove Strong Enough to Lift Flagging Sales

Apple's 2018 Macs and iPads Could Prove Strong Enough to Lift Flagging Sales