Stock Quotes in this Article: ALJ, GPRC, GTE, UAL, SAND

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 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.

United Continental

One name that's trending very close to triggering a major breakout trade is United Continental (UAL), the holding company for United Airlines and Continental Airlines. This stock has been modestly moving higher so far in 2012, with shares up around 12%.

If you take a look at the chart for United Continental, you'll see that this stock has been uptrending fairly strong for the last three months, with shares moving from a low of $17.45 to a recent high of $21.74 a share. During that uptrend, shares of UAL have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed UAL within range of triggering a major breakout trade.

Traders should now look for long-biased trades in UAL once it manages to break out above some near-term overhead resistance at $21.38 to $21.74 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 4,285,310 shares. If that breakout triggers soon, then UAL will set up to re-test or possibly take out its next significant overhead resistance levels at $24.50 to $25 a share. Shares of UAL could even trend a few points north of $25 a share if that breakout triggers soon.

Traders can look to buy UAL off any weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $19.98 a share. One could also buy UAL off strength once it clears those breakout levels with volume and then use a stop around $21 to $20.50 a share.

Alon USA Energy

Another stock that's closing in on a major breakout trade is Alon USA Energy (ALJ), which is an independent refiner and marketer of petroleum products operating primarily in the South Central, Southwestern and Western regions of the United States. This stock has been off to a blazing hot start in 2012, with shares up over 60%.

If you take a look at the chart for Alon USA Energy, you'll see that this stock has been trending sideways for the last two months, with shares moving between $12.06 on the downside and $14.69 on the upside. Shares of ALJ have just started to move back above its 50-day moving average of $13.61 and it's quickly moving within range of triggering a major breakout trade above the upper-end of its sideways chart pattern.

Market players should now look for long-biased trades in ALJ once it manages to break out above some near-term overhead resistance at $14.69 a share with high volume. Look for a sustained move or close above $14.69 with volume that registers near or above its three-month average action of 205,928 shares. If that breakout triggers soon, then ALJ will push into new 52-week high territory and it will set up to re-test or possibly take out its 2011 high of $15.21 a share. Any high-volume move above $15.21 could push ALJ towards $20 a share in the future.

Traders can look to buy ALJ off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $13.61 a share. One could also buy off strength once ALJ triggers that breakout above $14.69 to $15.21 a share and then simply use a stop just below $14 a share.

Sandstorm Gold

One name that's trending very close to triggering a near-term breakout trade is Sandstorm Gold (SAND), which is a growth focused resource based company that seeks to complete gold purchase agreements with gold mining companies that have advanced stage development projects or operating mines. This stock has been ripping to the upside so far in 2012, with shares up a whopping 65%.

If you look at the chart for Sandstorm Gold, you'll notice that this stock has been uptrending very strong for the last six months, with shares soaring from a low of $7.41 to a recent high of $15.43 a share. During that uptrend, shares of SAND have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of SAND have recently found buying interest at around $13.30 a share and it's now moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in SAND once it manages to break out above some near-term overhead resistance levels at $14.11 to $15.43 a share with volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 563,297 shares. If that breakout triggers soon, then SAND will enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $18 to north of $20 a share.

One can look to buy SAND off any weakness to anticipate that breakout and simply use a stop that sits just below some near-term support at $13.33 to $13 a share. Traders can also buy off strength once SAND clears $14.11 to $15.43 a share with high volume and then use a stop just below $14 to $13.50 a share.

Guanwei Recycling

Another stock that's moving within range of triggering a major breakout trade is Guanwei Recycling (GPRC). This company is engaged in the manufacture and distribution of low density polyethylene and other recycled plastics products, using imported raw material in the form of plastic waste. This stock has been uptrending strong over the last three months, with shares up sharply by over 50%.

If you look at the chart for Guanwei Recycling, you'll see that this stock formed a major bottom between September and October at around 67 to 66 cents per share. Following that bottom, shares of GPRC have uptrending strongly from 66 cents per share to its recent high of $1.07 a share. During that uptrend, shares of GPRC have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed GPRC within range of triggering a major breakout trade.

Traders should now look for long-biased trades in GPRC if it can manage to break out above some key overhead resistance levels at $1.07 to $1.10 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 80,511 shares. If that breakout triggers soon, then GPRC will set up to re-test or possibly take out its next major overhead resistance levels at $1.30 to $1.72 a share. Any high-volume move above $1.72 would then put $1.93 to $2.10 into focus for GPRC.

Traders can look to buy GPRC off any weakness as long as it's trending within range of its 50-day moving average of 90 cents per share. One could also buy off strength once GPRC clears $1.07 to $1.10 with volume and then simply use a stop at 92 cents per share. I would add to either position once GPRC takes out $1.30 a share with heavy upside volume.

Gran Tierra Energy

My final idea that's trending very close to breaking out is Gran Tierra Energy (GTE), which is an independent international energy company engaged in oil and gas acquisition, exploration, development and production. This stock is up modestly so far in 2012, with shares higher by 14%.

If you look at the chart for Gran Tierra Energy, you'll notice that this stock has been uptrending modestly for the last three months, with shares advancing from $4.23 to $5.75 a share. After hitting $5.75 a share, GTE has moved into a sideways trading pattern between $4.83 on the downside and $5.42 on the upside. This stock has just started to move back above both its 50-day at $5.09 and its 200-day at $5.29 with heavy upside volume. That move is also quickly pushing GTE within range of triggering a significant breakout trade.

Traders should now look for long-biased trades in GTE once it manages to take out some near-term overhead resistance levels at $5.42 to $5.75 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 527,406 shares. If that breakout triggers soon, then GTE will set up to re-test or possibly take out its next major overhead resistance levels at $6.40 to $6.70 a share. Any high-volume move above $6.65 would then put $7.27 to $7.70 into focus for GTE.

One could look to buy GTE off any weakness to anticipate that breakout and then simply use a stop right around its 50-day at $5.09 a share. Traders can also just buy off strength once GTE takes out those breakout levels with volume and then simply use a stop right below its 200-day at $5.29 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.