Stock Quotes in this Article: AAPL, GTIV, MITK, MXWL, UEC

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.

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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Apple


One stock that’s trading within range of triggering a major breakout trade is Apple (AAPL), which is off to a hot start in 2012, with shares up over 50% so far.

If you take a look at the chart for Apple, you’ll notice that this stock recently gapped down big off its earnings report with heavy volume. That move pushed Apple right under its 50-day moving average to around $570 a share. At that level, shares of Apple found buying interest as the stock tested $570 a number of times and held that level. Shares of Apple then busted back above its 50-day moving average, and now the stock is trending within range of triggering a breakout trade.

Traders should now look for long-biased traders in AAPL once it manages to trigger a breakout trade above some near-term overhead resistance levels at $616.40 to $619.87 a share, and then above $620.25 a share with high volume. Look for a sustained move or close above those levels with volume that’s near or above its three-month average action of 15.4 million shares. If we get that action soon, then AAPL will setup to re-test and possibly take out its next major overhead resistance level at $644 a share. That $644 level also happens to be the all-time high for Apple.

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One could look to buy AAPL off any weakness to anticipate the breakout, and simply use a stop that sits around some near-term support at $600 a share. One could also just buy off strength once AAPL clears those breakout levels with volume. If you buy off strength, then use a stop that sits just below $610 a share.

Apple, which shows up on a list of 3 Stocks to Sell if They Crash on Earnings, was also featured recently in "5 Huge Stocks Ready to Slingshot Higher."

Mitek Systems

Another stock in the technology complex that’s trading within range of triggering a near-term breakout trade is Mitek Systems (MITK), which is engaged in the development, sale and service of software solutions related to mobile imaging applications and intelligent recognition software. This stock has been hammered by the bears so far in 2012, with shares down by over 35%.

If you take a look at the chart for Mitek Systems, you’ll see that this stock recently failed to trigger a breakout above some near-term overhead resistance levels at $4.38 to $4.75 a share. After failing to take those levels out, the stock sold off hard and took out its 50-day moving average. Following that move, shares of Mitek Systems found some buying interest at around $2.72 a share, and then ripped back above its 50-day moving average with heavy volume. Now the stock has started to take out $4.38 a share, and it’s quickly setting up to clear $4.75 a share.

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Market players should now look for long-biased traders in MITK if this stock can manage to trigger a breakout trade above some overhead resistance levels at $4.75 a share with high volume. Look for a sustained move or close above $4.75 with volume that registers near or above its three-month average action of 918,274 shares. If we get that action soon, then MITK will have a great chance of filling a previous gap that send the stock down from over $6 to under $3 a share. Some upside targets are $6.30 to possibly even its 200-day moving average of $7.08 a share.

You can look to buy MITK off any weakness to anticipate that breakout and simply use a stop somewhere around $4 a share. A better way to play this is to buy off strength once MITK takes out $4.75 with high volume. Place a stop just below $4.38 a share if you buy MITK off strength.

Maxwell Technologies

One stock in the electronic instruments and controls complex that’s approaching a major breakout trade is Maxwell Technologies (MXWL), which develops, manufactures and markets energy storage and power delivery products for transportation, industrial, telecommunications and other applications and microelectronic products for space and satellite applications. The bears have slaughtered this stock so far in 2012, with shares off by over 55%.

If you look at the chart for Maxwell Technologies, you’ll notice that this stock gapped down huge back in April from over $15 to under $8 a share with heavy volume. Following that massive move lower, shares of Maxwell Technologies went on to continue to downtrend and hit its 52-week low in July at $5.81 a share. During that downtrend, shares of Maxwell Technologies were consistently making lower highs and lower lows, which is bearish technical price action.

That said, the stock has formed a massive range bound trade for the last three months, with shares bouncing back and forth between $7.20 and $5.81 a share. Now this stock has started to take out its 50-day moving average of $6.68 a share, and it’s moving within range of triggering a near-term breakout trade.

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Market players should now look for long-biased trades in MXWL if it can manage to trigger a near-term breakout trade above some overhead resistance levels at $6.78 to $7.20 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 445,698 shares. If we get that action soon, then MXWL could easily re-test and possibly take out its next major overhead resistance levels at $8.55 to $10 a share.

One could buy MXWL off any weakness and simply use a stop that sits below some near-term support at $6.40 a share. You could also get long off strength once MXWL sustains a move above $6.78 to $7.20 with high volume. If you buy off strength, then I would use a stop that sits just below its 50-day moving average of $6.68 a share.

Gentiva Health Services

Another stock that’s setting up to trigger a near-term breakout trade is Gentiva Health Services (GTIV), which is engaged in providing home health services and hospice services. This stock hasn’t done much so far in 2012, with shares up just 5% so far.

If you look at the chart for Gentiva Health Services, you’ll see that this stock formed a major top back in April and May at around $9 a share, and then subsequently went on to crash lower to its recent low of $5.13 a share. During that monster move lower, shares of Gentiva Health Services were making lower highs and lower lows, which is bearish technical price action. That said, after tagging that $5.13 low, this stock started to reverse course and uptrend back above both its 50-day and 200-day moving averages. That move has now pushed GTIV within range of triggering a near-term breakout trade.

Traders should now look for long-biased traders in GTIV if this stock can manage to take out some near-term overhead resistance levels at $7.24 to $7.33 a share with high volume. Look for a sustained move or close above those levels with volume that’s near or above its three-month average action of 277,416 shares. If we get that action soon, then GTIV will have a great chance of re-testing and possibly taking out that former top at around $9 a share.

One could be a buyer of GTIV off any weakness, and simply use a stop that sites just below its 50-day moving average of $6.79 a share. You could also just buy off strength once GTIV takes out $7.24 to $7.33 with high volume, and then use a stop just under $6.94 a share.

Uranium Energy

My final idea for today that’s setting up to trigger a major breakout trade is metal and mining player Uranium Energy (UEC), a natural resource exploration company engaged in the exploration of properties in the U.S. This stock has been hammered by the bears so far in 2012, with shares down by over 35%.

If you look at the chart for Uranium Energy, you’ll see that this stock was downtrending badly since it topped out in March at around $4.19 to $4.08 a share, and then subsequently plunged to its recent low of $1.76 a share. During that sharp move lower, shares of Uranium Energy were consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to mark a potential bottom at $1.76 to $1.75 a share, since buyers have stepped in to defend it twice at those levels during the last two months. Shares of UEC have also started to trend sideways for the past two months, between $2.36 and $1.75 a share.

Market players should now look for long-biased traders in UEC once it manages to clear some near-term overhead resistance levels at $2.05 to $2.15 a share, and then $2.30 to $2.36 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 768,319 shares. If we get that move soon, then this stock will have a great chance of re-testing and possibly taking out its 200-day moving average of $2.99 a share.

One could look to buy UEC off weakness and simply use as stop right below $1.76 to $1.75 a share. One could also just buy off strength once UEC clears its 50-day moving average of $2.05 with heavy volume, and simply use a stop just below $1.85 a share. Look to add to either position once UEC clears $2.15 to $2.36 a share with strong volume.

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 stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.