3 Stocks Setting Up for Major Breakouts

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 who can ultimately push the stock significantly higher.

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.

AveXis

One clinical-stage gene therapy player that's starting to trend within range of triggering a big breakout trade is AveXis (AVXS) . This stock has been in play with the bulls over the last six months, with shares ripping sharply higher by 44.3%.

If you take a look at the chart for AveXis, you'll notice that this stock has been uptrending strong over the last two months and change, with shares moving higher off a low of $44.68 to a recent high of $61.60. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That strong move higher is now quickly pushing shares of AveXis within range of triggering a big breakout trade above a key downtrend line that dates back to last November's high for the stock.

Traders should now look for long-biased trades in AveXis if it manages to clear that key downtrend line over some near-term resistance levels at $61 to $61.60 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 519,595 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 $67.50 to its all-time high of $72.72 a share.

Traders can look to buy AveXis off weakness to anticipate that breakout and simply use a stop that sits right below its 20-day moving average of $56.63 a share or around $54 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 comfortable percentage from your entry point.

Under Armour

Another consumer goods player that's starting to trend within range of triggering a near-term breakout trade is Under Armour (UA) , which develops, markets and distributes branded performance apparel, footwear, and accessories for men, women, and youth primarily in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America. This stock has been smacked lower by the bears over the last six months, with shares falling sharply by 47.9%.

If you take a glance at the chart of Under Armour, you'll notice that this stock recently gapped-down sharply lower from around $26 a share to its new 52-week low of $17.77 a share with monster downside volume flows. Following that sharp spike to the downside, shares of Under Armour quickly stabilized and have now started to uptrend, with the stock moving from the $17.77 low to its recent high just above $20 a share. That modest uptrend is now starting to push this stock within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in Under Armour if it manages to break out above its gap-down-day high just above $20 a share and then over its 20-day moving average of $20.80 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 develops soon, then this stock will set up to re-fill some of its previous gap-down-day zone that started near $26 a share.

Traders can look to buy Under Armour off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $19 or at $18.53 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 comfortable percentage from your entry point.

Aduro BioTech

Another clinical-stage immunotherapy player that's starting to spike within range of triggering a near-term breakout trade is Aduro BioTech (ADRO) , which focuses on the discovery, development, and commercialization that transform the treatment of challenging diseases. This stock has been hit hard by the sellers over the last six months, with shares falling by 22.3%.

If you take a glance at the chart for Aduro BioTech you'll notice this stock recently formed a double bottom chart pattern, after shares found some buying interest at $10.65 to $10.55 a share over the last month. Following that potential bottom, shares of Aduro BioTech have now started to spike higher and move back above both its 50-day moving average of $11.37 a share and its 20-day moving average of $11.38 a share. That spike is now quickly pushing this stock within range of triggering a near-term breakout trade above a key downtrend line that dates back to the start of the year.

Traders should now look for long-biased trades in Aduro BioTech if it manages to break over that key downtrend line that will start above $11.86 to $12.20 a share and then over its 200-day moving average of $12.48 a share to $12.55 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 253,087 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 $14 to $14.25, or even $14.85 to $15 a share.

Traders can look to buy Aduro BioTech off weakness to anticipate that breakout and simply use a stop that sits right around those recent double bottom support levels. 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.

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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