Stock Quotes in this Article: FFIV, JCP, MCP, NVGN, SPPI

 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 powerful breakout trade I flagged recently was rare earth metals player Molycorp (MCP), which I featured in April 23's "4 Under-$10 Stocks Making Big Moves" at around $5.40 a share. I mentioned in that piece that shares of MCP were starting to trend higher right off its 52-week low of $4.70 with decent upside volume. That move was starting to push shares of MCP within range of triggering a near-term breakout trade above some resistance levels at $5.83 to its 50-day at $5.93 a share.

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Guess what happened? Shares of MCP flirted with that breakout for a number of trading sessions following my piece, with the stock hitting intraday highs at $6.07 and $6.06 a share. Then shares of MCP pulled back to right around its 50-day moving average before triggering that breakout again today in spades. Shares of MCP have exploded higher here by over 20%, and the stock has hit an intraday high of $6.98 a share. That's a ridiculous gain in a very short timeframe for anyone who played the breakout.

That move now has MCP flirting with another key breakout since the stock is testing its next major overhead resistance levels at $6.55 to $6.61 a share. Traders should continue to look for more upside in the near future if MCP can close above those levels today.

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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.

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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J.C. Penney

One stock that's quickly moving within range of triggering a major breakout trade is J.C. Penney (JCP), which sells merchandise and services to consumers through its department stores and Direct channels. This stock has been hit hard by the sellers during the last six months, with shares off by 15.2%.

If you take a look at the chart for J.C. Penney, you'll notice that this stock has been uptrending strong for the last month, with shares soaring higher from its low of $13.55 to its recent high of $17.88 a share. During that uptrend, shares of JCP have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of JCP within range of triggering a major breakout trade.

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Traders should now look for long-biased trades in JCP if it manages to break out above some near-term overhead resistance levels at $17.88 to its gap down day high from February at $18.34 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 19.62 million shares. If that breakout triggers soon, then JCP will set up to re-fill its previous gap down zone above $18.34 that started above $21 a share. Some possible upside targets if JCP gets into that gap with volume are $21 to $23 a share.

Traders can look to buy JCP off any weakness to anticipate that breakout and simply use a stop that sits right around $16 a share, or near its 50-day at $15.63 a share. One could also buy JCP off strength once it takes out those breakout levels with volume and then simply use a stop right below $17 a share.

This stock has big time short-squeeze potential, since the current short interest as a percentage of the float for JCP is extremely high at 24.3%. The bears are going to be very nervous if JCP trades into that gap with volume, so be ready to play it if it does.

Novogen


Another stock that looks poised to breakout out here and potentially rip sharply higher is Novogen (NVGN), which develops and markets pharmaceutical products. This stock has been hammered by the bears so far in 2013, with shares off by 40%.

If you take a look at the chart for Novogen, you'll notice that this stock has been downtrending badly for the last month and change, with shares dropping from $6.50 to its recent low of $3.93 a share. During that downtrend, shares of NVGN have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of NVGN are now starting to bounce right off its 200-day moving average at $4.21 a share, and the stock is quickly moving within range of breaking out above a key downtrend line.

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Market players should now look for long-biased trades in NVGN if it manages to break out above some near-term overhead resistance levels at $4.50 to its 50-day moving average at $5.01 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 223,479 shares. If that breakout triggers soon, then NVGN will set up for a potentially explosive move that could take the stock back toward its next major overhead resistance levels at $6 to $7 a share.

Traders can look to buy NVGN off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.93 a share. One could also buy NVGN off strength once it takes out those breakout levels with volume and then simply use a stop right below its 200-day moving average at $4.21 a share or near $3.93 a share.

Spectrum Pharmaceuticals

Another stock that's quickly moving within range of triggering a big time breakout trade is Spectrum Pharmaceuticals (SPPI), which is a commercial stage biotechnology company integrated in commercial and drug development operations, primarily in oncology and hematology. This stock has been destroyed by the short-sellers so far in 2013, with shares off by over 30%.

If you look at the chart for Spectrum Pharmaceuticals, you'll see that this stock has been trending sideways for the last two months in a consolidation chart pattern, with shares moving between $6.92 on the downside and $7.77 on the upside. This sideways pattern is coming after shares of SPPI gapped down sharply back in March from $12.47 to below $8 a share with heavy downside volume. Shares of SPPI are now quickly moving within range of triggering a major breakout trade above the upper end of its recent sideways chart pattern.

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Market players should now look for long-biased trades in SPPI if it manages to break out above some near-term overhead resistance levels at $7.65 to $7.77 a share and then once it takes out its 50-day at $8 and its gap down day high at $8.26 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 1.43 million shares. If that breakout hits soon, then SPPI will set up to re-fill some of its previous gap down zone that started at $12.47 a share. Some possible upside targets if SPPI gets into that gap with volume are $9.50 to its 200-day at $10.89 a share.

Traders can look to buy SPPI off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $7.09 to $7 a share. One can also buy SPPI off strength once it clears those breakout levels with volume and then simply use a stop at around $7 a share.

This stock is an absolute favorite target of the short-sellers, since the current short interest as a percentage of the float for SPPI is extremely high at 37.4%. This stock has explosive upside potential if it trades into that gap with volume, so make sure to have it on your breakout trading radar.

F5 Networks

Another stock that's starting to move into range of triggering a near-term breakout trade is F5 Networks (FFIV), which provides technology that optimizes the delivery of network-based applications and the security, performance and availability of servers, data storage devices and other network resources. This stock is off to a weak start so far in 2013, with shares off by 17.9%.

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If you look at the chart for F5 Networks, you'll notice that this stock has been uptrending strong for the last few weeks, with shares moving higher from its low of $73 to its intraday high of $80.03 a share. During that uptrend, shares of FFIV have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FFIV within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in FFIV if it manages to break out above some near-term overhead resistance levels at $81.30 to its 50-day moving average at $82.47 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 1.80 million shares. If that breakout triggers soon, then FFIV will set up to re-fill some of its previous gap down zone from April that started just above $90 a share. Some possible targets off that breakout are $86 to its 200-day moving average at $93.78 a share.

Traders can look to buy FFIV off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $78 a share. One can also buy FFIV off strength once it takes out those breakout levels with volume and then simply use a stop that sits right below $80 a share.

Maxwell Technologies

My final breakout idea today is Maxwell Technologies (MXWL), which develops, manufactures and markets energy storage and power delivery products for transportation, industrial telecommunications and other applications, as well as microelectronic products for space and satellite applications. This stock has been under pressure by the sellers so far in 2013, with shares off by 22%.

If you look at the chart for Maxwell Technologies, you'll notice that this stock has been uptrending strong for the last month and change, with shares soaring higher from its low of $4.90 to its recent high of $6.75 a share. During that uptrend, shares of MXWL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MXWL within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in MXWL if it manages to break out above some near-term overhead resistance at $6.75 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 474,995 shares. If that breakout triggers soon, then MXWL will set up to re-fill some of its previous gap down zone from March that started at $7.80 a share. Any high-volume move above $7.80 will then put $8.50 to $9 into range for shares of MXWL.

Traders can look to buy MXWL off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $6.23 a share or near $6 a share. One could also buy MXWL off strength once it clears $6.75 a share with volume and then simply use a stop right below its 50-day at $6.23 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.