These 5 Stocks Are Poised to Get Smoking Hot
These stocks could get hot

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 ones 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, which are breakout plays and stocks that are acting technically bullish. These are the ones that often make monster moves to the upside. What's great about breakout trading is that you only focus on trends, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts are 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.

Coty

One personal products player that's starting to trend within range of triggering a near-term breakout trade is Coty (COTY) , which manufactures, markets, and distributes beauty products worldwide. This stock has been smacked lower by the sellers over the last six months, with shares falling large by 30.4%.

If you take a look at the chart for Coty, you'll notice that this stock has been consolidating and trending sideways over the last three months, with shares moving between $17.82 a share on the downside and $19.88 a share on the upside. This sideways chart pattern is coming after a massive downtrend, that saw shares of Coty fall from its recent high of $29.50 a share to that $17.82 low. Shares of Coty are now starting to bounce higher right off its 20-day moving average of $18.74 a share and back above its 50-day moving average of $18.81 a share. That bounce is quickly pushing this stock within range of triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern.

Traders should now look for long-biased trades in Coty if it manages to break out above some near-term overhead resistance levels at $19.34 to $19.88 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 7.16 million shares. If that breakout hits soon, then this stock will set up to re-fill some of its previous gap-down-day zone from last November that started near $22 a share.

Traders can look to buy Coty off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $18.14 or at $17.82 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.

Atwood Oceanics

A offshore drilling contractor that's starting to spike within range of triggering a big breakout trade is Atwood Oceanics (ATW) , which engages in the drilling and completion of exploratory and developmental oil and gas wells. This stock has been in favor with the bulls over the last six months, with shares moving higher by 18.9%.

If you take a glance at the chart for Atwood Oceanics, you'll notice that this stock has been consolidating and trending sideways over the last two months, with shares moving between $12.25 a share on the downside and $15.37 a share on the upside. Shares of Atwood Oceanics has now started to bounce higher right off its 20-day moving average of $13.48 a share with decent upside volume flows. That move is now quickly pushing this stock within range of triggering a big breakout trade above the upper-end of its recent sideways trending chart pattern.

Traders should now look for long-biased trade in Atwood Oceanics if it manages to break out above some near-term overhead resistance levels at $14.39 to $14.50 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 4.48 million shares. If that breakout kicks off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $15.37 a share. Any high-volume move above $15.37 will then give this stock a chance to tag $17 to $20 a share.

Traders can look to buy Atwood Oceanics off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $13.31 to $12.25 a share. One could 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.

Helix Energy Solutions Group

Another energy player that's starting to move within range of triggering a near-term breakout trade is Helix Energy Solutions Group (HLX) , which provides specialty services to the offshore energy industry primarily in the Gulf of Mexico, North Sea, the Asia Pacific, and West Africa regions. This stock has been trending up notably over the last six months, with shares moving higher by 12.4%.

If you take a glance at the chart of Helix Energy Solutions Group, you'll notice that this stock recently formed a double bottom chart pattern, after shares found some buying interest at $8.14 to $8.20 a share over the last three months. This potential double bottom is coming after a massive downtrend over the last two months, which saw this stock fall off its high of $11.87 a share to its recent low of $8.20 a share. Shares of Helix Energy Solutions Group have now started to spike higher off that $8.20 low and off its 200-day moving average of $8.25 a share, and that spike is quickly pushing this stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in Helix Energy Solutions Group if it manages to break out above some near-term overhead resistance levels at $8.90 to its 20-day moving average of $9 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 2.62 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 its 50-day moving average of $9.68 a share to $9.82, or even $10.50 to $11 a share.

Traders can look to buy Helix Energy Solutions Group off weakness to anticipate that breakout and simply use a stop that sits right below those recent double bottom support levels. 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.

Seadrill Partners LLC

Another energy player that's starting to trend within range of triggering a big breakout trade is Seadrill Partners LLC (SDLP) , which owns, operates, and acquires offshore drilling units. This stock has been red hot over the last three months, with shares flying higher by 32.7%.

If you take a glance at the chart for Seadrill Partners LLC, you'll notice that this stock has been consolidating and trending sideways over the last two months, with shares moving between $4.06 a share on the downside and $4.55 a share on the upside. This stock has now started to bounce right off its 200-day moving average of $4.13 a share and it's starting to flirt with its 20-day moving average of $4.34 a share. That bounce is quickly pushing shares of Seadrill Partners LLC within range of triggering a big breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Seadrill Partners LLC if it manages to break out above its 20-day moving average of $4.34 a share to $4.55 a share and then above more resistance at $4.60 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 651,739 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 $5.07 a share. Any high-volume move above $5.07 will then give this stock a chance to re-fill its previous gap-down-day zone from last July that started near $5.75 a share.

Traders can look to buy Seadrill Partners LLC off weakness to anticipate that breakout and simply use a stop that sits right below its 200-day moving average of $4.13 a share to more support at $4.06 to its 50-day moving average of $3.95 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.

Microsemi

My final breakout trading prospect is technology player Microsemi (MSCC) , which designs, manufactures, and markets analog and mixed-signal semiconductor solutions in the U.S., Europe, and Asia. This stock has been on fire over the last six months, with shares soaring higher by 62.6%.

If you look at the chart for Microsemi, you'll notice that this stock has been consolidating and trending sideways over the last two months, with shares moving between $52.03 a share on the downside and $57.97 a share on the upside. Shares of Microsemi have now started to spike higher right off its 50-day moving average of $54.63 a share and back above its 20-day moving average of $55.62 a share. That spike is 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 Microsemi if it manages to break out above some near-term overhead resistance levels at $57 to its 52-week high of $57.97 a share with volume that hits near or above its three-month average action of 1.40 million shares. If that breakout triggers soon, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65, or even $70 a share.

Traders can look to buy shares of Microsemi off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $53.12 to $52.03 a 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 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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