Stock Quotes in this Article: ENZ, HEB, SIRI, VCLK, FB

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 is gold and silver player Northern Dynasty Minerals (NAK). In Aug. 2's “5 Stocks Under $10 Ready to Soar Higher, I highlighted how NAK was potentially forming a bottoming chart pattern near $2.20 a share and was quickly setting up to trigger a major breakout trade above $2.50 to $2.94 a share. At the time of that article, NAK was trading at around $2.50 a share.

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Guess what happened? Shares of NAK went on to trigger that breakout with strong upside volume flows, and the stock skyrocketed to hit its recent high of $5.40 a share. That’s a 100% move in less than two months for anyone who caught that trade. The best part about what NAK did was that you had price, trend and volume all acting together, which is a key set of criteria I look for when I trade breakout candidates.

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.

Facebook

One stock in the social media complex that’s trending close to triggering a near-term breakout trade is Facebook (FB). This stock has been hammered by the sellers so far in 2012, with shares down around 40%.

If you take a look at the chart for Facebook, you’ll see that since it came public in May this stock sold off hard from $45 to its recent low of $17.55 a share hit earlier this month. During that sharp selloff, shares of FB were mostly making lower highs and lower lows, which is bearish technical price action.

That said, since hitting $17.55, FB has started to reverse its bearish downtrend and it has entered a bullish uptrend. The stock has started to move back above its 50-day moving average, and it’s trading within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in FB once it manages to break out above some key overhead resistance levels at $23.37 to $25 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 41 million shares. If that breakout triggers soon, then FB will have a great chance of getting into a previous gap down zone above $25 that started around $28 a share. Some potential upside targets if FB gets into that gap over $25 are $29.50 to $32.50 a share.

One could look to buy FB off any weakness to anticipate that breakout, and then simply use a stop that sits just below its 50-day at $22.14 a share. One could also just buy off strength once FB clears $23.37 a share, and then simply use the same stop around $22.14 a share. I would add to either position once FB clears $25 a share with strong upside volume and gets into that gap down zone from back in late July.
It’s worth mentioning that Facebook is a heavily-shorted stock, since the current short interest as a percentage of the float is very high at 17%. If FB can manage to trigger that breakout soon, then this stock could be setting up for a monster short-squeeze.

Hemispherx BioPharma

A stock in the biotechnology and drugs complex that’s setting up for a near-term breakout trade is Hemispherx BioPharma (HEB), which is engaged in the clinical development of new drugs therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. This stock has been on fire so far in 2012, with shares up around 380%.

This company has a major catalyst on the horizon, since it will meet with the FDA on Feb. 1, 2013, for the possible approval of its drug Ampligen, which treats chronic fatigue syndrome. This stock has already started to run-up ahead of that catalyst, but there could be plenty more upside where that came from.

If you take a look at the chart for Hemispherx BioPharma, you’ll notice that this stock has been uptrending very strong for the last three months, with shares soaring from a low of 25 cents to its recent high of 96 cents. During that uptrend, shares of HEB have been consistently making higher lows and higher highs, which is bullish technical price action. That move has also been accompanied by heavy upside volume, especially during the last month and a half. Shares of HEB are quickly moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in HEB if it can manage to take out some near-term overhead resistance levels at 95 cents to $1.01 a share with high volume. Look for a sustained move or close above those levels with volume that tracks in close to or above its three-month average action of 1.3 million shares. If that breakout triggers soon, then HEB will have a great chance of doubling and hitting $2 a share.

One can look to buy HEB off any weakness and anticipate that breakout and simply use a stop that sits right around some near-term support at 75 cents to 72 cents per share. One could also buy off strength once HEB clears 95 cents to $1.01 a share with volume, and then simply use a stop at around 90 cents to 88 cents per share.

ValueClick

One stock in the advertising complex that’s trading within range of triggering a near-term breakout trade is ValueClick (VCLK), which offers a range of products and services that enable marketers to engage with the customers online and through mobile devices. This stock is up modestly so far in 2012, with shares up around 7%.

If you look at the chart for ValueClick, you’ll notice that this stock has been trading inside of a large sideways chart pattern for the last three months, with shares trending between $15 on the downside and $17.61 on the upside. Shares of VCLK have recently started to uptrend and make higher lows and higher highs. This move is quickly pushing VCLK within range of breaking out above the high-end of its sideways chart pattern. If that breakout hits, then VCLK could enter a new bullish uptrend.

Market players should now look for long-biased trades in VCLK if it can manage to break out above some key overhead resistance levels at $17.61 to $17.83 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 879,541 shares. If that breakout triggers soon, then VCLK will have an excellent chance of re-filling its previous gap down zone from May that started near $22 a share.

One could look to buy VCLK off any weakness and anticipate that breakout, and simply use a stop that sits right around its 50-day moving average of $16.12 a share. One could also just buy off strength once VCLK takes out $17.61 to $17.83 with volume, and simply use a stop around $17 to $16.50 a share. Keep in mind that once VLCK clears $17.64 it will have taken out its 200-day moving average, which is bullish technical price action.

This is another stock that’s a popular target of the short-sellers. The current short interest as a percentage of the float for VLCK is rather high at 10%. Any future breakout into that gap could spark a solid short-covering rally for VCLK, so make sure to keep this name on your breakout trading radar.

Sirius XM Radio

Another stock that’s trading within range of a major breakout trade is Sirius XM Radio (SIRI), which broadcasts its music, sports, entertainment, comedy, talk, news, traffic and weather channels in the U.S. on a subscription fee basis through its two satellite radio systems. This stock has been blazing a trail higher so far in 2012, with shares up over 35%.

If you look at the chart for Sirius XM Radio, you’ll see that this stock has been uptrending extremely strong for the last three months, with shares skyrocketing from $1.80 to its recent high of $2.64 a share. During that uptrend, shares of SIRI have mostly been making higher lows and higher highs, which is bullish technical price action. That move has quickly pushing SIRI within range of triggering a major breakout trade.

Traders should now look for long-biased trades in SIRI if it can manage to break out above some near-term overhead resistance levels at $2.59 to $2.64 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 57.7 million shares. If that breakout triggers soon, then I expect SIRI to continue on its uptrend and potentially tag $4 to $5 a share, or possibly even higher.

One could look to buy SIRI off weakness and simply use a stop that sits just below its 50-day moving average of $2.37 a share. One could also buy SIRI off strength once it takes out $2.59 to $2.64 a share with high volume, and then simply use a stop at around $2.50 to $2.40 a share.

This is another stock that’s a favorite target of the bears. The current short interest as a percentage of the float for SIRI is pretty high at 8.6%. The bears have also been increasing their bets from the last reporting period by 9%, or by about 23.4 million shares. Look for a solid short-squeeze to develop if SIRI triggers that breakout soon.

Enzo Biochem

One more stock that could be ready to trigger a near-term breakout trade is Enzo Biochem (ENZ), an integrated life sciences and biotechnology company focused on harnessing biological processes to develop research tools, diagnostics and therapeutics and serves as a provider of test services, including esoteric tests, to the medical community. This stock is off to a bearish start in 2012, with shares off by over 25% during the last six months.

If you look at the chart for Enzo Biochem, you’ll see that this stock hit a near-term bottom in August at around $1.33 a share. Since tagging that bottom, shares of ENZ have started to uptrend towards its current price of around $1.95 a share. During that uptrend, shares of ENZ have been making mostly higher lows and higher highs, which is bullish technical price action. That move is quickly pushing ENZ within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in ENZ once it manages to clear some near-term overhead resistance levels at $2 to $2.19 a share with high volume. Look for volume off that move that registers near or above its three-month average action of 190,455 shares. If that breakout triggers soon, then ENZ will have a great chance of re-testing or possibly taking out its next major overhead resistance levels at $2.88 to $3.12 a share. Any high-volume move above $3.12 could then put $4 a share into play for ENZ.

One could look to buy ENZ off any weakness, and simply use a stop that sits right around its 50-day moving average of $1.67 a share. You could also just buy off strength once ENZ clears $2.00 to $2.19 a share with high volume, and then simply use a stop around some near-term support at $1.84 a share. Keep in mind that once ENZ clears $2.17 with volume, then it will have taken out its 200-day moving average, which is bullish technical price action.

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.