These 5 Stocks Are Ready to Break Out

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, it's free to find new buyers and momentum players which 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 I love to trade.

I frequently flag high-probability setups, breakout plays and stocks that are acting technically bullish. These are the ones 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, 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.

ContraVir Pharmaceuticals

A biopharmaceutical player that's starting to spike within range of triggering a major breakout trade is ContraVir Pharmaceuticals (CTRV) , which focused on the development of antiviral drugs with a primary emphasis on the treatment of hepatitis B virus, or HBV, infections. This stock has been red hot over the last six months, with shares ripping to the upside by 143.6%.

If you take a glance at the chart of ContraVir Pharmaceuticals, you'll notice that that this stock is forming a bullish flag pattern, with shares showing some relative strength on Friday vs. the overall market weakness, and with the stock bouncing to the upside right off its 20-day moving average of $2 a share. This bullish price action is now starting to push shares of ContraVir Pharmaceuticals within range of triggering a major breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in ContraVir Pharmaceuticals if it manages to break out above some near-term overhead resistance levels at $2.13 to $2.18 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 1.59 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 $2.37 to its 52-week high of $2.65 a share. Any high-volume move above $2.65 will then give this stock a chance to make a run at $3 a share, or well north of $3 a share.

Traders can look to buy ContraVir Pharmaceuticals off weakness to anticipate that breakout and simply use a stop that sits just below some near-term support levels at $1.90 or $1.75 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.

Zafgen

A biotechnology player that's starting to trend within range of triggering a big breakout trade is Zafgen (ZFGN) , which focuses on the development of therapeutics for patients suffering from obesity and obesity-related disorders. This stock has been destroyed by the sellers over the last six months, with shares falling sharply by 45.7%.

If you take a glance at the chart for Zafgen, you'll notice that this stock recently formed a double bottom chart pattern, after shares found some buying interest at $2.89 to $2.93 a share over the last three months. Following that bottom, this stock has now started to uptrend and trade back above both its 20-day moving average of $3.29 a share and its 50-day moving average of $3.34 a share. That uptrend is now quickly pushing shares of Zafgen within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for a long-biased trade in Zafgen if it manages to break out above some near-term overhead resistance levels at $3.75 to $3.83 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 271,582 shares. If that breakout develops soon, then this stock will set up to refill some of its previous gap-down-day zone from July that started near $7 a share.

Traders can look to buy Zafgen off weakness to anticipate that breakout and simply use a stop that sits right below its 20-day moving average of $3.29 a share. One could 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.

Intra-Cellular Therapies

One biopharmaceutical player that's starting to move within range of triggering a big breakout trade is Intra-Cellular Therapies (ITCI) , which discovers and develops small molecule drugs for the treatment of neuropsychiatric and neurologic disorders within the central nervous system. This stock has been smashed lower by the bears over the last six months, with shares dropping sharply by 60.2%.

If you take a look at the chart for Intra-Cellular Therapies, you'll notice that this stock recently gapped down sharply from $42.40 a share to under $16 a share with monster downside volume flows. Following that move, this stock went on to print a new 52-week low of $10.80 a share. That said, shares of Intra-Cellular Therapies have now started to rebound sharply off that $10.80 low, and it has moved back above its 20-day moving average of $12.90 a share. That rebound is now quickly pushing this stock within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Intra-Cellular Therapies if it manages to break out above some near-term overhead resistance levels at $14.77 to $15.46 a share and then above its gap-down-day high from September at $16.23 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 982,675 shares. If that breakout hits soon, then this stock will set up to re-fill some of its previous gap-down-day zone that started at $42.40 a share.

Traders can look to buy Intra-Cellular Therapies off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $13.28 a share, or around its 20-day moving average of $12.90 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.

Applied Genetic Technologies

Another clinical stage biotechnology player that's starting to trend within range of triggering a big breakout trade is Applied Genetic Technologies (AGTC) , which develops genetic therapies to treat patients with inherited diseases. This stock has been under heavy selling pressure over the last six months, with shares off sharply by 35.2%.

If you take a glance at the chart for Applied Genetic Technologies, you'll notice that this stock has been uptrending strongly over the last month, with shares soaring higher off its new 52-week low of $6.35 a share to its recent high of $10.85 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That strong uptrend has now pushed shares of Applied Genetic Technologies within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Applied Genetic Technologies if it manages to break out above some near-term overhead resistance levels at $10.50 to $10.85 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 233,757 shares. If that breakout gets started soon, then this stock will set up to refill its previous gap-down-day zone from September that started at $13.33 a share.

Traders can look to buy Applied Genetic Technologies off weakness to anticipate that breakout and simply use a stop that sits just below some near-term support at $9.25 a share, or around its 50-day moving average of $8.85 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.

Macrocure

My final breakout trading prospect is Israel-based biotechnology player Macrocure (MCUR) , which focuses on developing, manufacturing, and commercializing novel cell therapy products for the treatment of chronic and other hard-to-heal wounds. This stock has been in play with the bulls over the last six months, with shares up big by 34.8%.

If you look at the chart for Macrocure, you'll notice that this stock has recently formed a double bottom chart pattern, after shares found some buying interest at $1.36 to $1.41 a share over the last three months. Shares of Macrocure have now started to spike higher off both its 50-day moving average of $1.55 a share and its 20-day moving average of $1.56 a share. That spike to the upside is now quickly pushing shares of Macrocure within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Macrocure if it manages to break out above some near-term overhead resistance levels at $1.67 to $1.78 a share and then above more resistance at $1.80 a share with volume that hits near or above its three-month average action of 480,841 shares. If that breakout develops soon, then this stock will set up to retest or possibly take out its next major overhead resistance levels at $2.20 to $2.43 a share, or even its 52-week high of $3.20 a share.

Traders can look to buy shares of Macrocure off weakness to anticipate that breakout and simply use a stop that sits just below those recent double bottom support levels, or near its 200-day moving average of $1.30 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.

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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