Stock Quotes in this Article: CGR, HTZ, KCG, TGB, UBNT

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.

One recent example of a successful breakout trade that I flagged was biotechnology and drugs player Rosetta Genomics (ROSG). In “5 Stocks Under $10 Set to Soar” on Aug. 9, I mentioned that ROSG was nearing some major previous support levels at $4 to $3.75 a share, and that the stock was extremely oversold. I said that ROSG was poised for a monster bounce if the stock held those levels, and if big upside volume started to flow into the name.

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Now, technically, I didn’t mention any breakout levels in that article, since none had developed at that time with the stock trending near those previous support levels. That said, I did tweet out continued commentary on ROSG as the trade setup, and then the stock went on to trigger a major breakout.

Shares of ROSG exploded higher on Wednesday by around 40% as it triggered a major breakout trade above a number of key overhead resistance levels at $4.85 to $5.23 a share with massive volume. As I write this piece, ROSG is up another 7% today as the stock continues to advance above its 200-day moving average of $6.10 a share. If this uptrend continues for ROSG, then this stock will setup to trigger another breakout trade above its 50-day moving average of $8.65 a share.

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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

 

 

Taseko Mines

One stock that looks poised to trigger a major breakout soon is Taseko Mines (TGB), which is focused on the production of copper and molybdenum from the Gibraltar mine and on permitting the New Prosperity gold and copper project. This stock has been beaten down by the sellers during the last six months, with shares off by over 30%.

If you take a look at the chart for Taseko Mines, you’ll notice that this stock has formed a major bottoming chart pattern over the last three months, with shares finding buying interest whenever its traded down to $2.45 to $2.46 a share. Following that double bottom chart pattern, shares of TBG have started to uptrend back above its 50-day moving average of $2.65 a share with decent volume. That move has now pushed TGB within range of triggering a near-term breakout trade.

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Traders should now look for long-biased traders in TGB once it manages to break out above some overhead resistance levels at $2.87 to $2.89 a share, and then above $3.05 to $3.06 a share with high volume. Look for a sustained move or close above all of those levels with volume that hits near or above its three-month average action of 376,995 shares. Keep in mind that a move over $3.06 will mean that TGB has cleared its 200-day moving average, which is a key technical level. If that breakout triggers soon, then TGB has a great chance of trending higher back towards its next significant overhead resistance levels at $3.60 to $4.30 a share.

One could look to buy TGB off any weakness and simply anticipate that breakout, with a stop somewhere near $2.65 to $2.45 a share. One could also just buy off strength once TGB clears those breakout levels with high volume, and then simply use a stop at around $2.80 to $2.60 a share, or even tighter.

Claude Resources

Another stock that looks ready to trigger a powerful breakout trade is Claude Resources (CGR), which is engaged in the acquisition, exploration, and development of precious metal properties and the production and marketing of minerals. Claude's mineral properties are located in northern Saskatchewan and northwestern Ontario. This stock has been crushed by the sellers so far this year, with shares off by over 45%.

If you take a look at the chart for Claude Resources, you’ll see that this stock has been trading range bound for the past four months, between 56 cents to 57 cents on the downside and 76 cents on the upside. That chart pattern has so far marked a triple bottom for CGR off of 56 cents per share. Now CGR is starting to recapture its 50-day moving average of 64 cents per share with decent volume. That move is quickly pushing CGR within range of triggering a major breakout trade.

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Market players should now look for long-biased traders in CGR if this stock can manage to trigger a breakout trade above some near-term overhead resistance levels at 73 cents to 76 cents per 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 296,069 shares. If that breakout triggers soon, then CGR could explode to the upside and possibly hit its next major overhead resistance levels at 90 cents to $1.20 a share.

One can look to buy CGR off any weakness and anticipate that breakout, and simply use a stop that sits near its 50-day moving average of 64 cents per share. Or you could just buy off strength once CGR clears 73 cents to 76 cents per share with high volume, and then simply use a stop somewhere around 67 cents per share. I would add to either position once CGR closes above 76 cents per share with heavy volume.

Knight Capital Group

A stock in the investment services complex that’s trending within range of triggering a near-term breakout trade is Knight Capital Group (KCG), a global financial services firm that provides access to the capital markets across multiple asset classes to a network of clients, including buy- and sell-side firms and corporations. This stock has been hammered by the bears so far in 2012, with shares down by over 75%.

If you look at the chart for Knight Capital Group, you’ll notice that this stock plunged and gapped down huge earlier this month from around $10.50 to its recent low of $2.27 a share with massive volume. That crash has pushed KCG into extremely oversold territory, since its current relative strength index (RSI) reading is now 20.88. Following that crash, shares of KCG have now started to uptrend a bit with the stock making lower highs from $2.27 to $2.75 a share. If that pattern can hold, then KCG has a chance of triggering a near-term breakout trade.

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Traders should now look for long-biased trades in KCG if it can manage to trigger a near-term breakout trade above overhead resistance levels at $3 to $3.12 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 9,814,250 shares. If that breakout triggers soon, then KCG has a great chance of re-testing its next major overhead resistance level at $4.25 a share, and it could possibly get into that previous gap down above $4.32 a share.

One could look to buy KCG off weakness and simply anticipate that breakout. I would probably use a stop at around $2.75 to $2.68 a share, since those levels will need to hold to maintain the higher low pattern. It might be a better idea to just buy off strength once KCG takes out $3 to $3.12 with high volume. I would use the same stop if you get long KCG off strength. I would add to either position once this stock trades above its gap down day high of $4.32 a share with volume.

Ubiquiti Networks

Another stock in the communications equipment complex that’s trading within range of triggering a major breakout trade is Ubiquiti Networks (UBNT), which offers a portfolio of wireless networking products and solutions, including systems, high-performance radios, antennas and management tools, designed for wireless networking and other applications in the unlicensed radio frequency spectrum. This stock has been destroyed by the bears during the last six months, with shares down by 65%.

If you look at the chart for Ubiquiti Networks, you’ll notice that this stock recently gapped down huge from over $15 to below $9 a share with monster volume. Following that gap down, shares of UBNT went on to print a new 52-week low at $7.80 a share. That said, the stock has started to rebound off that low with decent upside volume, and it’s now trending very close to breaking out and entering that gap down zone. If UBNT can sustain a move into that gap, then this stock could bet setting up to explode higher.

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Traders should now look for long-biased traders in UBNT if this stock can manage to break out above some near-term overhead resistance at $9.45 a share, and if it can take out its gap down day high of $9.53 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 952,273 shares. If that breakout triggers soon, then UBNT could easily rip higher and fill some of that gap back towards $11.50 to $12.32 a share, or possibly even higher. At last check, UBNT has printed an intraday high of $9.50 and volume is clocking in above 300,000 shares.

One could buy this stock off weakness and simply use a stop right around some near-term support at $8.72 a share. Or you can buy off strength once $9.45 to $9.53 a share gets taken out with high volume, and then use a stop near today’s low of $8.95 a share.

Hertz Global

One more stock that could be ready to trigger a near-term breakout trade is rental and leasing player Hertz Global (HTZ), which, through its subsidiaries, engages in the car and equipment rental businesses worldwide. The company operates in two segments, Car Rental and Equipment Rental. This stock is up modestly so far in 2012, with shares higher by around 11%.

If you look at the chart for Hertz Global, you’ll notice that this stock recently traded down from $13.70 to $10.22 a share with heavy selling volume. During that slide lower, shares of Hertz Global were consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to rebound sharply off that $10.32 low with strong volume, and it’s started to move back above its 50-day moving average of $12.29 a share. That move is quickly pushing HTZ within range of triggering a near-term breakout trade.

Traders should now look for long-biased traders in HTZ once it manages to clear some near-term overhead resistance levels at $13 to $13.13 a share, and then above $13.70 to $13.91 a share with high volume. Look for volume off that move that hits near or above its three-month average action of 5,636,770 shares. If that breakout triggers soon, then HTZ has a great chance of re-testing and possibly taking out its May high of $16.64 a share.

One could look to get long HTZ off weakness and simply use a stop right around its 50-day moving average of $12.29 a share. You could also just buy off strength once HTZ takes out $13 and then its 200-day moving average of $13.13 a share with high volume. I would look to add to ether position once HTZ clears $13.70 to $13.91 with heavy volume. If you buy HTZ off strength, use a stop that sits near $12.34 or below the 50-day.

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.