Stock Quotes in this Article: MSPD, RATE, SEM, TBI, SLCA

WINDERMERE, Fla. (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 that can push the stock significantly higher.

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An example of a recent successful breakout trade is residential real estate developer in China Xinyuan Real Estate , which I featured in Oct. 19's "4 Stocks Under $5 Moving Higher." This stock was just starting to move back above its 50-day moving average and it was quickly moving within range of triggering a near-term breakout trade. That trade was set to hit once Xinyuan manages to take out some near-term overhead resistance levels at $2.96 to $3.10 with high volume.

Guess what happened? The following day shares of XIN triggered that breakout with monster upside volume. The stock exploded above those breakout levels and has now gone on to hit its recent high of $3.60 a share. I mentioned in that original piece that XIN should test $3.60 to $3.85 a share if the breakout triggered, and that's exactly what the stock is doing now. Traders should now watch XIN to trigger its next major breakout trade, which will hit once it clears $3.81 with high volume. If that breakout hits soon, then we could see XIN trend north of $4 a share.

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.

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.
 

Trueblue

One name that's trending very close to triggering a near-term breakout trade is Trueblue (TBI)
, a provider of temporary blue-collar staffing. This stock hasn't done much in 2012, with shares down 4%.

If you take a look at the chart for Trueblue, you'll notice that this stock recently gapped down big from over $16 to a low of $11.84 a share with heavy volume. Following that move, shares of TBI have started to rebound sharply towards its current price of $13.26 a share. That rebound is coming off of extremely oversold levels, since its current relative strength index (RSI) reading is 25.31. That move has now pushed TBI within range of triggering a near-term breakout trade above its gap down day high.

Traders should now look for long-biased trades in TBI once it manages to break out above its gap down day high of $13.88 a share with high volume. Look for a sustained move or close above $13.88 with volume that registers near or above its three-month average action of 197,859 shares. If that breakout triggers soon, then TBI will set up to re-fill some of its gap down zone that started back near $16 a share. At last check, TBI has hit an intraday high of $13.93 and volume is already over 450,000 shares.

Traders can look to buy TBI off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $12.69 a share. One could also buy TBI off strength once it clears $13.88 to $13.93 with volume and then use a stop just below $13.50 a share.

Bankrate

Another stock that's just starting to flirt with a major breakout trade is Bankrate (RATE), which owns and operates Internet-based consumer banking and personal finance network. This stock has been pummeled by sellers so far in 2012, with shares off by close to 50%.

If you take a look at the chart for Bankrate, you'll notice that this stock recently gapped down huge from over $14 to a recent low of $10.27 with massive volume. Following that sharp move lower, shares of RATE have started to rebound and find buyers at around $10.50 a share. That rebound is coming off of extremely oversold levels since its current relative strength index (RSI) reading is 23.84. The recent action in Bankrate is quickly pushing the stock within range of breaking out above its gap down day high.

Market players should now look for long-biased trades once it manages to break out above its gap down day high of $11.26 a share with high volume. Look for a sustained move or close above $11.26 with volume that hits close to or above its three-month average action of 658,913 shares. If that breakout triggers soon, then RATE will set up to re-fill some of its gap down zone that started near $14 a share. At last check, Bankrate has hit an intraday high of $11.49 but volume is light with around 106,000 shares traded.

One can look to buy RATE off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $10.56 a share. One could also buy off strength once RATE triggers that breakout above $11.26 to $11.49 and then simply use a stop just below $11 a share.

Select Medical

One name that's just starting to trigger a big breakout here is Select Medical (SEM), which provides long term acute care hospital services and inpatient acute rehabilitative hospital care and provides physical, occupational and speech rehabilitation service. This stock has been uptrending strong so far in 2012, with shares up by 37%.

If you look at the chart for Select Medical, you'll notice that this tock has been trending sideways for the last two months and change, with shares moving between $10 on the downside and $11.61 on the upside. Just today shares of SEM have started to blast higher and take out the high end of its recent trading range. This move has been accompanied by decent overall volume.

Market players should now look for long-biased trades in SEM as long as it's trending above some near-term overhead resistance at $11.61 a share, and then once it breaks out above more overhead resistance at $12.50 a share with volume. Look for a sustained move or close above those breakout levels with volume that hits near or above its three-month average action of 442,614 shares. If that breakout triggers soon, then SEM will set up to re-test or possibly take out its next major overhead resistance level at $14.89 a share.

One can look to buy SEM off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $10.87 a share. Traders can also buy off strength once SEM clears $11.61 to $12.50 a share with high volume and then use a stop just below $11 a share.

U.S. Silica

Another stock that's moving within range of triggering a near-term breakout trade is U.S. Silica (SEM), a domestic producer of commercial silica, a specialized mineral that is a critical input into a variety of attractive end markets. This stock has been a favorite play for the bulls during the last three months, with shares up a whopping 40%.

If you look at the chart for U.S. Silica, you'll see that this stock has been downtrending for the last two months, with shares dropping from a high of $15.22 to its recent low of $12.37 a share. During that slide lower, shares of SLCA have been consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to spike higher today and move back above its 50-day moving average of $13.29 a share. The spike is quickly pushing SCLA within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in U.S Silica if it can manage to break out above some near-term overhead resistance levels at $14 to $14.99 a share, and then above more resistance at $15.22 a share with high volume. Look for a sustained move or close above those level with volume that hits near or above its three-month average action of 348,395 shares. If that breakout triggers soon, then SLCA could make an explosive move back towards its next major overhead resistance level at $18.82 a share.

Traders can look to buy SLCA off any weakness as long as it's trending within range of its 50-day at $13.30 a share. One could use a stop just below today's low of $12.74 a share. One can also buy off strength once SLCA starts to take out those breakout levels with volume and then simply use a stop around $14 to $13.30 a share. I would add to either position once SLCA takes out $15.22 with heavy volume.

Mindspeed Technologies

My final idea that's trading very close to triggering a major breakout trade is Mindspeed Technologies (MSPD), which designs, develops and sells semiconductor networking solutions for communications applications in enterprise, access, metropolitan and area networks. This stock has been hot during the last three months, with shares up a whopping 50%.

If you look at the chart for Mindspeed Technologies, you'll notice that this stock has been trending sideways for the last month and change, with shares moving between $3 on the downside and $3.76 on the upside. As MSPD has moved sideways, the stock has been able to hold above its 50-day moving average. Now shares of MSPD are starting to rip higher today by 8% with decent volume. This move is quickly pushing MSPD within range of triggering a major breakout trade.

Traders should now look for long-biased trades in MSPD once it manages to take out some near-term overhead resistance at $3.76 a share, and then once it clears its 200-day moving average of $4.13 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 306,532 shares. If that breakout triggers soon, then MSPD will have a great chance of re-testing or possibly taking out its next major overhead resistance levels at $5 to $5.50 a share, and possibly even $6 a share.

One could look to buy MSPD off any weakness to anticipate that breakout and then simply use a stop right around its 50-day at $3.17 a share. Traders can also just buy off strength once MSPD takes out those breakout levels with volume and then simply use a stop just below $3.50 a share.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.
 

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., 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.