Stock Quotes in this Article: ADK, CPRX, INFI, VRTX, DRTX

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 that can ultimately push the stock significantly higher.

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One example of a successful breakout trade I flagged recently was solar power player SolarCity (SCTY), which I featured in June 28's "5 Stocks Ready to Break Out" at around $36.80 a share. I mentioned in that piece that SCTY had recently started to trend higher right off its 50-day moving average and was quickly starting to move with range of triggering a breakout trade above the upper end of its sideways trading chart pattern. That breakout was set to hit if SCTY managed to take out some near-term overhead resistance levels at $38.88 to $39.07 a share and then once it cleared more resistance levels at $39.59 to $40 a share.

Guess what happened? Shares of SCTY flirted with that breakout the following day after the stock tagged an intraday high of $41.20 a share. Then shares of SCTY pulled back the next two trading sessions with the stock hitting a low of $37.30 a share. That pullback was the last time this stock looked back since SCTY hit its recent high of $44.98 a share. That represents a gain of just over 20% for SCTY in just two weeks for anyone who bought the stock in anticipation of the breakout. Shares of SCTY still have more upside potential if this stock can manage to break out again above some near-term overhead resistance levels at $43.02 to $44.98 a share with high volume.

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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.

Catalyst Pharmaceutical

One stock that's quickly moving within range of triggering a major breakout trade is Catalyst Pharmaceuticals (CPRX), which is focused on the development and commercialization of prescription drugs targeting diseases of the central nervous system with a focus on the treatment of drug addiction and epilepsy. This stock has exploded higher so far in 2013, with shares up sharply by 146%.

If you take a look at the chart for Catalyst Pharmaceutical, you'll notice that this stock has been uptrending strong for the last month and change, with shares ripping higher from its low of 83 cents per share to its intraday high of $1.10 a share. During that move, shares of CPRX have been consistently making higher lows and higher highs, which is bullish technical price action. The upside volume for CPRX has also been tracking in bullish over the last few weeks. That move has now pushed shares of CPRX within range of triggering a major breakout trade.

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Traders should now look for long-biased trades in CPRX if it manages to break out above some near-term overhead resistance at $1.19 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 volume of 1.11 million shares. If that breakout triggers soon, then CPRX will set up to re-test or possibly take out its next major overhead resistance levels at $1.60 to $2 a share. Any high-volume move above $2 will then put its 52-week high at $2.27 into range for shares of CPRX.

Traders can look to buy CPRX off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day at 91 cents per share. One could also buy CPRX off strength once it takes out $1.19 a share with high volume and then simply use a stop that sits a comfortable percentage from your entry point.

The bears love this stock, since the current short interest as a percentage of the float for CPRX is very high at 16%. The shorts might be in big trouble here if CPRX takes out $1.19 with volume soon, so be ready to play this for a breakout and potential short-squeeze.

Vertex Pharmaceuticals

Another stock that looks poised to trigger a major breakout trade is Vertex Pharmaceuticals Pharmaceuticals (VRTX), which discovers, develops and commercializes small molecule drugs for the treatment of serious diseases. This stock has been on fire so far in 2013, with shares up a whopping 112%.

If you take a look at the chart for Vertex Pharmaceuticals, you'll notice that this stock has been uptrending strong for the last month, with shares soaring higher from its low of $73.40 to its intraday high of $89.42 a share. During that uptrend, shares of VRTX have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of VRTX have now started to break out above some past overhead resistance at $87.47 a share and the stock is tagging new 52-week highs.

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Market players should now look for long-biased trades in VRTX as long as it's trending above support at $85 or above that breakout level of $87.47 a share, and then once it breaks out again above $90 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 2.38 million shares. If that breakout triggers soon, then VRTX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $100 to $120 a share.

Traders can look to buy VRTX off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $85 a share. One could also buy VRTX off strength once it takes out $90 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Keep in mind that VRTX reports earnings on July 29 after the market close. Look for a run to $100 a share ahead of the quarter, and a possible run well north of $100 after the quarter if the market likes the earnings results.

AdCare Health Systems

Another name that's starting to trend within range of triggering a near-term breakout trade is AdCare Health Systems (ADK), which owns and manages skilled nursing facilities and assisted living facilities. This stock hasn't done much so far in 2013, with shares down by 4.3%.

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If you look at the chart for AdCare Health Systems, you'll notice that this stock has been uptrending a bit for the last few weeks, with shares moving higher from its low of $3.95 to its recent high of $4.80 a share. During that move, shares of ADK have been mostly making higher lows and higher highs, which is bullish technical price action. That move has also started to push shares of ADK within range of taking out its 200-day moving average at $4.67 and its 50-day moving average at $4.69, and within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in ADK if it manages to break out above some near-term overhead resistance levels at $4.80 to $4.89 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 53,987 shares. If that breakout hits soon, then ADK will set up to re-test or possibly take out its next major overhead resistance levels at $5.93 to its 52-week high at $6.26 a share.

Traders can look to buy ADK off any weakness to anticipate that breakout and simply use a stop that sits right below $4 a share. One can also buy ADK off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Durata Therapeutics

Another stock that's starting to trend within range of triggering a near-term breakout trade is Durata Therapeutics (DRTX), which develops and commercializes novel therapeutics for patients with infectious diseases and acute illnesses. This stock hasn't done much so far in 2013, with shares up by just 2.7%.

If you look at the chart for Durata Therapeutics, you'll notice that this stock has been trending sideways for the last two months and change, with shares moving between $6.65 on the downside and $7.99 on the upside. Shares of DRTX have just started to trend back above its 50-day moving average of $7.15 a share and it's quickly moving within range of breaking out above the upper-end of its sideways chart pattern.

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Traders should now look for long-biased trades in DRTX if it manages to break out above its 200-day moving average at $7.97 a share and then once it clears some past resistance at $7.99 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 86,143 shares. If that breakout triggers soon, then DRTX will set up to re-test or possibly take out its next major overhead resistance levels at $9.50 to $10.50 a share. Any high-volume move above $10.63 will then push shares of DRTX into all-time-high territory, which is bullish technical price action.

Traders can look to buy DRTX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $7.15 a share. One can also buy DRTX off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Infinity Pharmaceuticals

My final breakout trading idea is Infinity Pharmaceuticals (INFI), which discovers, develops, and delivers medicines for the treatment of cancer and related conditions. This stock has been destroyed by the bears so far in 2013, with shares down sharply by 46%.

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If you look at the chart for Infinity Pharmaceuticals, you'll notice that this stock has found some serious buying interest over the last two months, when ever it's traded below $17 or $16 a share. Shares of INFI have now started to uptrend over the last two weeks, with shares moving higher from its low of $15.45 to its intraday high of 418.80 a share. That move is quickly pushing shares of INFI within range of triggering a major breakout trade.

Traders should now look for long-biased trades in INFI if it manages to break out above some near-term overhead resistance levels at $19.80 a share to its 50-day at $20.69 a share and then once it takes out its gap down day high of $22.62 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 1.87 million shares. If that breakout triggers soon, then INFI will set up to re-fill some of its previous gap down zone from June that started at $29.13 a share. Some possible upside targets if INFI gets into that gap with volume are $24 to $25 a share.

Traders can look to buy INFI off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $17.50 to $16 a share. One could also buy INFI off strength once it clears 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.