Stock Quotes in this Article: NKTR, TSYS, APRI, ACRX, NGVC

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.

An example of a recent successful breakout trade is computer storage device player OCZ Technology Group (OCZ) which I featured in Jan. 24’s “4 Tech Stocks Under $10 Spiking Higher.” I mentioned in that piece that shares of OCZ were ripping higher right above some near-term support at $1.83 a share with heavy upside volume. That move was quickly pushing shares of OCZ within range of triggering a major breakout trade if the stock could manage to take out some key overhead resistance levels at $2.19 to $2.27 a share with high volume.

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Guess what happened? Shares of OCZ triggered that breakout the following trading session on monster upside volume. The stock exploded higher and closed up over $2.40 a share. The next trading day shares of OCZ hit a high of $2.77 a share, which represents a monster gain for anyone who bought the stock off my original article in anticipation of that breakout. Since then, shares of OCZ have pulled back to its current price of $2.08 a share, as profit taking took over. Traders can now look for long-biased trades in OCZ again as long as it doesn’t move back below its 50-day moving average of $1.88 a share with high volume.

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.

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Nektar Therapeutics

One name that’s trending very close to triggering a major breakout trade is Nektar Therapeutics (NKTR), which is a clinical-stage biopharmaceutical company developing a pipeline of drug candidates that utilize its PEGylation and polymer conjugate technology platforms, which are designed to improve the benefits of drugs for patients. This stock has been on fire so far in 2013, with shares up 17%.

If you take a look at the chart for Nektar Therapeutics, you’ll notice that this stock has been uptrending strong for the two months and change, with shares soaring from its low of $5.65 to its recent high of $9.58 a share. During that uptrend, shares of NKTR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NKTR within range of triggering a major breakout trade.

Traders should now look for long-biased trades in NKTR if it manages to break out above some near-term overhead resistance levels at $9.19 to $9.58 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 1.3 million shares. If that breakout triggers soon, then NKTR will set up to re-test or possibly take out its next major overhead resistance levels at $10.91 to $10.98 a share. Any high-volume move above those levels will then put $12 to $13 into range for shares of NKTR.

Traders can look to buy NKTR off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $8.46 a share or use its 200-day moving average at $8.17 a share. One could also buy off strength once NKTR takes out those breakout levels with volume and then simply use a stop that sits near $9 to $8.46 a share.

This stock is pretty popular among short-sellers, since the current short interest as a percentage of its float sits at 9.3%. If that breakout triggers soon, then look for some of those bears to get squeezed out of their positions, which will send this stock screaming higher.

AcelRx Pharmaceuticals

Another stock that’s trending within range of triggering a major breakout trade is AcelRx Pharmaceuticals (ACRX), a U.S.-based pharmaceutical company that develops and commercializes therapies for the treatment of pain. This stock has been blazing a trail to the upside so far in 2013, with shares up a whopping 24%.

If you take a look at the chart for AcelRx Pharmaceuticals, you’ll see that this stock has been uptrending very strong for the last two months, with shares soaring higher from its low of $3.30 to its recent high of $5.83 a share. During that uptrend, shares of ACRX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ACRX within range of triggering a major breakout trade that would push the stock to new all-time highs.

Market players should now look for long-biased trades in ACRX if it manages to break out above some near-term overhead resistance levels at $5.63 to $5.83 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 330,884 shares. If that breakout triggers soon, then ACRX will set up to enter new all-time highs, which is extremely bullish technical price action. This means that the stock will have no more overhead resistance levels to contend with. Some possible upside targets off that breakout are $8 to possible even $10 a share.

Traders can look to buy ACRX off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $4.41 a share. One could also buy off strength once ACRX clears those breakout levels with volume and then simply use a stop right around some key near-term support levels at $5.10 to $4.82 a share.

This is another name that’s popular among the short-sellers, since the current short interest as a percentage of the float for ACRX stands at 9.6%. The worst possible case for the bears is being short a stock that’s printing new all-time highs. That means that every one of them is losing money, which is never a successful venture in the markets. Look for a monster short-squeeze if ACRX can breakout and trend into all-time territory with volume.

Natural Grocers by Vitamin Cottage

One stock that’s quickly moving within range of triggering a major breakout trade is Natural Grocers by Vitamin Cottage (NGVC), a specialty retailer of natural and organic groceries and dietary supplements. This stock has been trending strong so far in 2013, with shares up 15.7%.

After the market close on Thursday, this company reported an impressive net sales increase of 28.1% to $95.8 million and a comparable store sales increase of 12.9%. Gross profit during the first quarter also increased 28.9% over the same period last year to $27.8 million.

If you look at the chart for Natural Grocers by Vitamin Cottage, you’ll notice that the stock is gapping sharply higher today right above its 50-day moving average of $19.76 a share with lighter-than-average volume. Volume so far today has hit 52,000 shares, which is half of its three-month average daily volume of 111,408 shares. This move is quickly pushing shares of NGVC within range of triggering a major breakout trade.

Market players should now look for long-biased trades in NGVC once it manages to break out above some near-term overhead resistance at $22.46 a share with high volume. Look for a sustained move or close above $22.46 a share with volume that hits near or above its three-month average action of 111,408 shares. If that breakout triggers soon, then NGVC will set up to re-test or possibly take its 52-week high and its all-time high of $25 a share.

Traders can look to buy NGVC off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $19.76 a share or right below today’s low of $20.55 a share. One can also buy off strength once NGVC clears $22.46 a share with volume and then use a stop that sits right below $21.50 a share or $20.54 a share.

This stock is a favorite target of the bears, since its current short interest as a percentage of its float stands at 14.7%. If that breakout triggers soon, then shares of NGVC could easily see a monster short-squeeze develop quickly. If shares of NGVC ever take out $25 with volume, then the bears will be in serious trouble because there will be no more overhead resistance for the stock to contend with.

TeleCommunication Systems

Another stock that’s moving within range of triggering a near-term breakout trade is TeleCommunication Systems (TSYS), which develops and delivers reliable and secure wireless communication technology. This stock has exploded higher during the last six months, with shares up a whopping 84%.

If you look at the chart for TeleCommunication Systems, you’ll see that this stock is ripping higher today back above its 50-day moving average of $2.40 a share with monster upside volume. The volume on the day has already registered over 848,000 shares, which is well above its three-month average action of 266,832 shares. This move is quickly pushing shares of TSYS within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in TSYS once it manages to break out above some near-term overhead resistance levels at $2.65 to $2.70 a share and then once it takes out more resistance at $2.89 to $3.09 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 266,832 shares. If that breakout triggers soon, then TSYS will set up to re-test or possibly take out its next major overhead resistance levels at $4.09 to $4.30 a share. Any high-volume move above $4.30 will then put $5.57 into range for shares of TSYS.

Traders can look to buy TSYS off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $2.17 a share. One can also buy off strength once TSYS takes out those breakout levels with volume and then simply use a stop right below its 50-day moving average of $2.40 a share.

Apricus Biosciences

My final idea today for a near-term breakout trade is Apricus Biosciences (APRI), which is a hybrid specialty pharmaceutical company in the areas of oncology, sexual dysfunction, autoimmune and anti-infectives, among others. This stock has been ripping higher so far in 2013, with shares up an impressive 42.7%.

If you look at the chart for Apricus Biosciences, you’ll notice that this stock has been uptrending strong for the last month, with shares spiking higher from its low of $1.95 to its recent high of $2.97 a share. During that uptrend, shares of APRI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has just started to push shares of APRI back above its 200-day moving average of $2.77 and it’s quickly pushing the stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in APRI once it manages to take out some near-term overhead resistance levels at $2.97 to $3.18 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 144,045 shares. If that breakout triggers soon, then APRI will set up to re-test or possibly take out its next major overhead resistance levels at $3.45 to $3.48 a share and at $3.51 to $3.67 a share. Any high-volume move above $4 a share will then give APRI a chance to re-fill some of its previous gap down zone from last February that started at around $5 a share.

One could look to buy APRI off any weakness to anticipate that breakout and then simply use a stop that sits right around some key near-term support levels at $2.50 to $2.40 a share. Traders can also look to buy APRI off strength once it takes out those breakout levels with volume and then simply use a stop that sits right below its 200-day moving average of $2.19 a share.

This is another stock with short-squeeze potential off that breakout, since the current short interest as a percentage of the float for APRI is pretty high at 10%. Look for a solid short-covering rally to ensue if APRI triggers that breakout soon.

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 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.