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.
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.