Stock Quotes in this Article: ASYS, ATML, NUAN, YGE, P

MADISON, 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 that can ultimately push the stock significantly higher.

One example of a successful breakout trade I recently flagged was Under Armour (UA), which I featured in April 1’s “5 Stocks Poised for Breakouts” at around $51 a share. I mentioned in that piece that UA was modestly uptrending for the prior month, which was bullish technical price action. I pointed out that the uptrend for Under Armour was quickly pushing the stock within range of triggering a breakout trade above some near-term overhead resistance levels at $51.46 to $51.75 a share and then above its 200-day moving average at $51.95 a share.

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Guess what happened? Shares of UA didn’t wait long to trigger that breakout, since the stock took out all of those resistance levels within a few days. Shares continued to soar higher the rest of the month, hitting a recent high of $58.52 a share. That represents a solid gain in a very short timeframe -- and it shows just how powerful breakout trading can be.

Keep in mind, though, that not all breakout trades are going to work, which is why you have to manage to risk at all times when trading this strategy.

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.

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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.

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Pandora

One stock that’s trending very close to triggering a major breakout trade is Pandora (P), which provides Internet radio services in the U.S. This stock has been on fire so far in 2013, with shares up a whopping 54%.

If you take a look at the chart for Pandora, you’ll notice that this stock recently formed a double bottom chart pattern at $12.66 to $12.76 a share. Following that bottom, shares of Pandora have bounced strongly right off its 50-day moving average and now the stock is quickly moving within range of taking out some near-term overhead resistance levels. Those resistance levels have acted as a wall for the stock for the last two months, so if they get taken out with volume, shares of Pandora could soar higher.

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Traders should now look for long-biased trades in P if it manages to break out above some near-term overhead resistance levels at $14.03 to $14.32 a share and then once it takes out its 52-week high at $14.70 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 5.24 million shares. If that breakout triggers soon, then P 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 -- or even $22 a share.

Traders can look to buy P off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average at $13.19 a share. One could also buy P off strength once it takes out those breakout levels with volume and then simply use a stop right below $13.50 a share or below its 50-day.

This stock is a favorite target of the short-sellers, since the current short interest as a percentage of the float for Pandora is very high at 22.3%. If that breakout triggers soon, then shares of Pandora could easily experience a monster short-squeeze, so make sure to have this name on your breakout trading radar.

Nuance Communications

Another stock that’s trending very close to triggering a near-term breakout trade is Nuance Communications (NUAN), which offers voice and language solutions for businesses and consumers around the world. This stock hasn’t done much so far in 2013, with shares up modestly by 2%.

If you take a look at the chart for Nuance Communications, you’ll notice that this stock recently formed a double bottom chart pattern at $19.98 to $20.01 a share. Following that bottom, shares of NUAN have spiked notably higher and taken out its 200-day moving average at $22.03 a share with decent upside volume flows. That move has now pushed shares of NUAN within range of triggering a near-term breakout trade.

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Market players should now look for long-biased trades in NUAN if it manages to break out above some near-term overhead resistance at $22.91 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 5.47 million shares. If that breakout triggers soon, then NUAN will set up to re-fill some of its previous gap down zone from February that started near $25 a share.

Traders can look to buy NUAN off any weakness to anticipate that breakout and simply use a stop that sits just below its 200-day moving average at $22.03 a share or down near some more support just below $21.50 a share. One could also buy NUAN off strength once it takes out that breakout level with volume and then simply use a stop that sits right below its 200-day at $22.03 a share.

This is another stock that the bears are leaning on, since the current short interest as a percentage of the float for NUAN is rather high at 9.3%. If NUAN breaks out soon, then we could easily see a solid short-covering rally that takes NUAN well into that gap.

Atmel

Another stock that’s starting to trend within range of triggering a near-term breakout trade is Atmel (ATML), which designs, develops and supplies microcontrollers, which are self-contained computers-on-a-chip. This stock has done next to nothing in 2013, with shares up by just 1.9%.

If you look at the chart for Atmel, you’ll notice that this stock recently bounced right off its 200-day moving average at $6.04 a share and the stock is now starting to flirt with its 50-day moving average at $6.65 a share. The upside volume today for ATML is tracking in strong, with over 4.43 million shares traded vs. its three-month average action of 5.43 million shares. Shares of ATML are now quickly moving within range of triggering a near-term breakout as the stock flirts with its 50-day.

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Market players should now look for long-biased trades in ATML if it manages to break out above some near-term overhead resistance levels at $6.93 to $6.99 a share and then once it clears more resistance at $7.10 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 5.43 shares. If that breakout hits soon, then ATML will set up to re-test or possibly take out its next major overhead resistance levels at $7.46 to around $8.50 a share, or even $9 a share.

Traders can look to buy ATML off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $6.25 a share. One can also buy ATML off strength once it clears those breakout levels with volume and then simply use a stop that sits right below its 50-day moving average at $6.65 a share.

Amtech Systems

Another stock that’s quickly trending within range of triggering a major breakout trade is Amtech Systems (ASYS), which is a supplier of horizontal diffusion furnace systems used for solar cell and semiconductor manufacturing. This stock is off to a decent start in 2013, with shares up 18.6%.

If you look at the chart for Amtech Systems, you’ll notice that this stock is spiking sharply higher today back above both its 200-day moving average at $3.66 a share and above its 50-day moving average at $3.79 a share with above-average volume. This move is quickly pushing shares of ASYS within range of triggering a major breakout above some key near-term overhead resistance levels.

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Traders should now look for long-biased trades in ASYS if it manages to break out above some near-term overhead resistance levels at $3.93 to $4.08 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 volume of 36,648 shares. If that breakout triggers soon, then ASYS will set up to re-test or possibly take out its next major overhead resistance levels at $4.85 to $4.98 a share. Any high-volume move above $4.98 will then put $6 a share into range for shares of ASYS.

Traders can look to buy ASYS off any weakness to anticipate that breakout and simply use a stop that sits right below its 200-day at $3.66 a share or around some key near-term support at $3.40 a share. One can also buy ASYS off strength once it takes out those breakout levels with volume and then simply use a stop just below its 200-day at $3.66 a share.

Yingli Green Energy

My final idea today for a near-term breakout trade is Yingli Green Energy (YGE), which is mainly engaged in the design, development, marketing, manufacturing and installation and sale of photovoltaic products in the People's Republic of China and overseas markets. This stock has been ripping to the upside during the last six months, with shares up 36%.

If you look at the chart for Yingli Green Energy, you’ll notice that this stock has been uptrending strong for the last month, with shares pushing higher from its low of $1.62 to its recent high of $2.45 a share. During that uptrend, shares of YGE have been mostly making higher lows and higher highs, which is bullish technical price action. Shares of YGE are now starting to flirt with taking out its 50-day moving average at $2.33 a share and the upside volume has been tracking in very strong over the last few trading session. This action is quickly pushing shares of YGE within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in YGE if it manages to break out above some near-tem overhead resistance levels at $2.45 to $2.57 a share and then once it clears more resistance at $2.65 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 2.34 million shares. If that breakout triggers soon, then YGE will set up to re-test or possibly take out its next major overhead resistance levels at $3.20 to $3.63 a share.

Traders can look to buy YGE off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.14 to $2 a share. One could also buy YGE off strength once it clears those breakout levels with volume and then simply use a stop just below its 50-day moving average at $2.33 a share or below its 200-day moving average at $2.14 a share.

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

-- Written by Roberto Pedone in Madison, Wis.

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

Roberto Pedone, based out of Madison, 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.