Stock Quotes in this Article: JVA, SAND, ANAC, DRTX, ATOS

 WINDERMERE, Fla. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new highs 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 successful breakout trade is casino entertainment services provider Caesars Entertainment (CZR) which I featured in Feb. 22’s “5 Stocks Ready to Break Out” at around $11.50 a share. I mentioned in that piece that shares of CZR had recently pulled back from $14.25 to around $10.50 a share and the stock was just starting to form a consolidation pattern at around $10.60 to $12 a share. I told readers to watch for shares of CZR to trigger a breakout trade above the highs of its consolidation pattern at $12.10 a share with high volume.

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Guess what happened? Shares of CZR didn’t wait long to trigger that breakout, since the stock took out $12.10 a share with heavy upside volume within a few trading sessions. Shares of CZR have exploded higher since I wrote that article, with the stock now hitting an intraday high of $17.12 a share. That represents a monster gain for anyone who played the breakout. The probability of success with this trade was high, because CZR cleared $12.10 with strong upside volume. This stock is now approaching extremely overbought levels, since its current relative strength index reading is 84.27.

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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Anacor Pharmaceuticals


One stock that’s trending within range of triggering a major breakout trade is Anacor Pharmaceuticals (ANAC), a biopharmaceutical company focused on discovering, developing and commercializing novel small-molecule therapeutics derived from its boron chemistry platform. This stock has been hammered by the bears so far in 2013, with shares off by 25%.

This company reported earnings on Thursday, beating Wall Street EPS estimates by 9 cents per share, after reporting a loss of 36 cents per share versus estimates of a loss of 44 cents per share. Revenue rose 26.15% to $3.28 million from the year-earlier period.

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If you take a look at the chart for Anacor Pharmaceuticals, you’ll see that this stock has been uptrending strong for the last few weeks, with shares marching higher from its low of $3 to its intraday high of $4.02 a share. During that uptrend, shares of ANAC have been mostly making higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of ANAC within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in ANAC if it manages to break out above its 50-day moving average of $4.10 a share and then above its gap down day high from January at $4.39 a share with volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 375,222 shares. If that breakout triggers soon, ANAC will set up to refill some of its previous gap-down zone that started near $5.50 a share. Any high-volume move above its 200-day at $5.34 and then above $5.90 will put $6.50 to $6.70 into range for shares of ANAC.

Traders can look to buy ANAC off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $3.50 a share. One could also buy off strength once ANAC takes out those breakout levels with volume and then simply use a stop near $3.70 a share.

Durata Therapeutics

Another stock that’s trending within range of triggering a near-term breakout trade is Durata Therapeutics (DRTX), a pharmaceutical company focused on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses. This stock is off to a decent start for the bulls in 2013, with shares up 12%.

If you take a look at the chart for Durata Therapeutics, you’ll notice that this stock has started to bounce higher today right above its 50-day moving average at $7.99 a share with above-average volume. This bounce is quickly pushing shares of DRTX within range of triggering a near-term breakout trade.

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Market players should now look for long-biased trades in DRTX if it manages to break out above some near-term overhead resistance levels at $9.05 to $9.27 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 volume of 31,302 shares. If that breakout triggers soon, then DRTX will set up to re-test or possibly take out its next major overhead resistance level at its all-time high of $10.63 a share. Any move above $10.63 would then push shares of DRTX into new all-time high territory, which is bullish technical price action. Some possible upside targets off that move are $13 to $15 a share.

Traders can look to buy DRTX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $7.99 a share. One could also buy off strength once DRTX clears those breakout levels with volume and then simply use a stop that sits a few percentage points below your entry point.

Atossa Genetics

Another stock that’s quickly moving within range of triggering a major breakout trade is Atossa Genetics (ATOS), a health care company focused on the commercialization of cellular and molecular diagnostic risk assessment products and related services for the detection of pre-cancerous conditions that could lead to breast cancer. This stock has been on fire so far in 2013, with shares up 101%.

This company has a catalyst on the horizon, since its set to present at the 25th Annual Roth Conference on March 19. The company plans on discussing its growth strategy and will provide updates on its national rollout of ForeCYTE Breast Health Test.

If you look at the chart for Atossa Genetics, you’ll notice that this stock recently formed a double bottom chart pattern at around $6.10 to $6.20 a share. That bottoming pattern also formed right above ATOS’s 50-day moving average of $5.68 a share. Shares of ATOS are now starting to rip significantly higher off that double-bottom area, and the stock is quickly moving within range of triggering a major breakout trade.

At last check, ATOS has hit an intraday high of $8.25 and volume at over 245,000 shares is dramatically higher than its three-month average action of 20,172 shares.

Market players should now look for long-biased trades in ATOS if it manages to break out above its intraday high of $8.25 a share and then its all-time high of $9.45 a share with high volume. Look for a sustained move or close above those breakout levels with volume that hits near or above its three-month average action of 20,172 shares. If that breakout triggers soon, then ATOS will enter new all-time high territory above $9.45, which is bullish technical price action. Some possible upside targets are $13 to $15 a share, or even higher.

Traders can look to buy ATOS off any notable weakness to anticipate that breakout and simply use a stop that sits near today’s low of $6.45 or near that double bottom area at $6.20 to $6.10 a share. One can also buy ATOS off strength once it clears those breakout levels with volume and then simply use a stop that’s a comfortable percentage from your entry point.

Coffee Holding

Another stock that’s moving within range of triggering a major breakout trade is Coffee Holding (JVA), an integrated wholesale coffee roaster and dealer in the U.S. This stock hasn’t done much so far in 2013, with shares up by just 4%.

If you look at the chart for Coffee Holding, you’ll notice that this stock has been trading inside of a consolidation pattern for the last month and change, with shares moving between $7.07 on the downside and $7.65 on the upside. A high-volume move above the upper end of that consolidation pattern could trigger a major breakout trade for shares of JVA.

Traders should now look for long-biased trades in JVA if it manages to break out above its 50-day moving average of $7.44 a share and then once it takes out more overhead resistance at $7.65 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 volume of 173,597 shares. If that breakout triggers soon, then JVA will set up to re-test or possibly take out its next major overhead resistance levels at $8.84 to $8.96 a share. Any high-volume move above $8.96 will then put $10 into range for shares of JVA.

Traders can look to buy JVA off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $7.16 to $7.07 a share. One can also buy off strength once JVA takes out those breakout levels with volume and then simply use a stop right around $7.25 a share.

Sandstorm Gold

My final breakout trade idea today is Sandstorm Gold (SAND), a growth-focused resource-based company that seeks to complete gold purchase agreements with gold mining companies that have advanced stage development projects or operating mines. This stock has been trending lower so far in 2013, with shares off by 15%.

If you look at the chart for Sandstorm Gold, you’ll notice that this stock has been uptrending strong for the last few weeks, with shares ripping higher from its low of $8.25 a share to its recent high of $10.22 a share. During that uptrend, shares of SAND have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SAND within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in SAND if it manages to break out above some near-term overhead resistance at $10.22 a share with high volume. Look for a sustained move or close above $10.22 a share with volume that registers near or above its three-month average action of 461,963 shares. If that breakout triggers soon, then SAND will set up to re-test or possibly take out its 200-day moving average at $10.91 a share and then its 50-day moving average at $11.13 a share. Any high-volume move above those levels will then put $12 to $12.50 into range for shares of SAND.

Traders can look to buy SAND off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $9.40 a share. One could also buy SAND off strength once it takes out $10.22 a share with volume and then simply use the same stop at $9.40 a share. I would add to either position once SAND clears its 50-day and 200-day moving averages with strong upside 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 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.