DELAFIELD, Wis. (Stockpickr) -- 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.
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Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out 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.
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With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.
Accelerate Diagnostics
One health care player that's quickly moving within range of triggering a big breakout trade is Accelerate Diagnostics (AXDX), which engages in the research and development and commercialization of proprietary surface chemistry formulation and quantitative bio-analytical measurement instruments. This stock has been on fire over the last six months, with shares up large by 78%.
If you take a look at the chart for Accelerate Diagnostics, you'll notice that this stock has been trending sideways and consolidating over the last three months, with shares moving between $11.01 on the downside and $14.92 on the upside. Shares of AXDX are starting to spike higher here right off its 50-day moving average of $13.34 a share. That spike is quickly pushing shares of AXDX within range of triggering a big breakout trade above some key near-term overhead resistance levels.
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Traders should now look for long-biased trades in AXDX if it manages to break out above some near-term overhead resistance levels at $13.79 to $14.50 a share and then once it takes out more resistance at $14.92 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 volume of 85,255 shares. If that breakout hits soon, then AXDX will set up to re-test or possibly take out its 52-week high at $16.45 a share. Any high-volume move above that level will then give AXDX a chance to tag $20 a share.
Traders can look to buy AXDX off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $13 or at $12.50 a share. One can also buy AXDX 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.
Infosonics
A communications equipment player that's starting to trend within range of triggering a major breakout trade is Infosonics (IFON), which designs, develops, manufactures and sells wireless telecommunication products and accessories to wireless carriers, distributors, retailers, dealer agents, resellers, and original equipment manufacturers. This stock has been in play big time over the last three months, with shares ripping sharply higher by 219%.
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If you take a look at the chart for Infosonics, you'll notice that this has stock has been uptrending strong over the last two months, with shares soaring higher from its low of 66 cents per share to its recent high of $3.08 a share. During that uptrend, shares of IFON have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of IFON are now starting to push within range of triggering a major breakout trade above some key near-term overhead resistance levels.
Traders should now look for long-biased trades in IFON if it manages to break out above some near-term overhead resistance levels at $2.90 to its 52-week high a $3.08 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 455,840 shares. If that breakout triggers soon, then IFON will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $4 to $4.50 a share.
Traders can look to buy IFON off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.30 or at $2 a share. One could also buy IFON 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.
Himax Technologies
Another technology player that's quickly moving within range of triggering a major breakout trade is Himax Technologies (HIMX), which designs, develops and markets semiconductors for flat panel displays. This stock has been blazing a part to the upside over the last six months, with shares up a whopping 117%.
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If you take a look at the chart for Himax Technologies, you'll notice that this stock has been trending sideways and consolidating over the last month and change, with shares moving between $12.72 on the downside and $15.33 on the upside. Shares of HIMX are now starting to spike higher right above the lower-end of that recent range. That spike is quickly pushing shares of HIMX within range of triggering a major breakout trade above some key near-term overhead resistance levels.
Traders should now look for long-biased trades in HIMX if it manages to break out above some near-term overhead resistance levels at $15.18 to its 52-week high at $15.33 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 7.96 million shares. If that breakout triggers soon, then HIMX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $18 to $20 a share.
Traders can look to buy HIMX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $12.92 a share or near more support at $12.72 a share. One can also buy HIMX 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.
Sarepta Therapeutics
Another stock that's starting to push within range of triggering a major breakout trade is Sarepta Therapeutics (SRPT), which focuses on the discovery and development of RNA-based therapeutics for the treatment of rare and infectious diseases. This stock is off to a strong start in 2014, with shares up sharply by 28%.
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If you look at the chart for Sarepta Therapeutics, you'll notice that this stock is breaking out here above some near-term overhead resistance at $25.55 a share. That breakout is coming after shares of SRPT recently pulled back to around its 50-day moving average, where buyers stepped into to support the stock. This intraday breakout is now starting to push shares of SRPT within range of triggering an even bigger breakout trade.
Traders should now look for long-biased trades in SRPT if it manages to break out above some near-term overhead resistance levels at $29.40 to its 200-day moving average of $33.09 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 2.98 million shares. If that breakout hits soon, then SRPT will set up to re-fill some of its previous gap-down-day zone from last November that started at $37.80 a share.
Traders can look to buy SRPT off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $22.60 a share or near its 50-day at $21.17 a share. One can also buy SRPT 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.
Targacept
My final breakout trading prospect is biotechnology player Targacept (TRGT), which engages in the development of neuronal nicotinic receptors therapeutics for the treatment of diseases and disorders of the nervous system. This stock has been under a bit of pressure by the sellers so far in 2014, with shares off by 10.5%.
If you look at the chart for Targacept, you'll notice that this stock recently pulled back from $4.91 a share to some to $4.09 a share. That pullback took shares of TRGT right into some previous support levels that sit around $4 a share. Since then, shares of TRGT have started to rebound sharply and move within range of triggering a major breakout trade.
Traders should now look for long-biased trades in TRGT if it manages to break out above its 50-day moving average of $4.66 and its 200-day moving average of $4.98 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 342,752 shares. If that breakout triggers soon, then TRGT will set up to re-fill some of its previous gap-down-day zone from last December that started at $6.11 a share.
Traders can look to buy TRGT off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $4 a share. One can also buy TRGT off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.
To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including
CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
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