Stock Quotes in this Article: BSX, MTG, RDN, TVL, UA

 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 example of a successful breakout trade I recently flagged was TravelCenters of America (TA), which I featured in March 14’s “5 Stocks Under $10 Triggering Breakouts” at around $7.50 a share. TA had been uptrending strong over the previous month, and the stock was quickly moving within range of triggering a near-term breakout trade above resistance levels at $7.60 to $7.64 a share.

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Guess what happened? Shares of TA triggered that exact breakout following their earnings report on March 18 with heavy upside volume. Volume that day registered over 3 million shares, which is well above its three-month average action of 431,000 shares. This stock went on to hit a recent high of $9.82 a share, which represents a monster gain in a very short timeframe for anyone who played that breakout. Shares of TA are now setting up again to take out $9.82 a share, so we could still have more upside for this stock in the near future.

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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Radian Group

One stock that’s trading very close to triggering a major breakout trade is Radian Group (RDN), which provides credit-related insurance coverage and financial services to mortgage lenders and other financial institutions. This stock has been on fire so far in 2013, with shares up a whopping 75%.

If you take a look at the chart for Radian Group, you’ll notice that this stock has been uptrending very strong for the last five months, with shares soaring higher from its low of $3.74 to its recent high of $10.95 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. Shares of RDN have also been consolidating for the last month, with the stock moving between $9.26 on the downside and close to $11 a share on the upside. Since RDN is now trading just above $10.50 a share, it’s quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in RDN if it manages to break out above some near-term overhead resistance levels at $10.67 to its 52-week high of $10.95 a share 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 9.59 million shares. If that breakout triggers soon, then RDN will set up to enter new 52-week-high territory, which is bullish price action. Some possible upside targets off that breakout are $15 to $18 a share.

Traders can look to buy RDN off any weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support levels at $10.03 to $9.76 a share. One could also buy RDN off strength once it takes out those breakout levels with volume and then simply use a stop right around $10.40 to $10.03 share.

This stock is an absolute favorite target of the short-sellers, since the current short interest as a percentage of the float for RDN is extremely high at 25.2%. If that breakout triggers soon, then RDN could easily experience a monster short-squeeze that sends this stock screaming higher from current levels.

MGIC Investment

Another stock that’s quickly moving within range of triggering a near-term breakout trade is MGIC Investment (MTG), which is a provider of private mortgage insurance in the United States. This stock has exploded higher so far in 2013, with shares up a whopping 86%.

If you take a look at the chart for MGIC Investment, you’ll see that this stock has recently pulled back after a monster run, with shares dropping from its high of $6.19 to its recent low of $4.32 a share. During that pullback, shares of MTG have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of MTG have formed a double bottom at $4.31 to $4.32 a share, and the stock is now quickly moving within range of triggering a near-term breakout trade.

Shares of MTG broke out last Thursday above some near-term overhead resistance at $4.70 a share with heavy upside volume. Volume for that breakout registered 38 million shares, which is well above its three-month average action of 16.84 million shares.
Market players should now look for long-biased trades in MTG as long as it’s trending above $4.70 or $4.31 a share, and then once it manages to break out above some near-term overhead resistance levels at $5 to $5.24 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 16.84 million shares. If that breakout triggers soon, then MTG will set up to re-test or possibly take out its 52-week high of $6.19 a share. Any high-volume move above $6.19 will then put $7 to $8 into range for shares of MTG.

Traders can look to buy MTG off any weakness to anticipate that breakout and simply use a stop that sits right around $4.70 to $4.31 a share. One could also buy MTG off strength once it clears $5 to $5.24 a share with volume and then simply use a stop that sits just below $4.70 a share. I would add to either position if MTG clears its 52-week high at $6.19 a share with heavy upside volume.

This stock isn’t loved on Wall Street, since the current short interest as a percentage of the float for MTG is very high at 19.7%. If the bears are wrong on MTG in the short-term, and this stock triggers that breakout, then we could easily be on the cusp of a giant short-squeeze.

Under Armour

Another stock that’s quickly approaching a near-term breakout trade is Under Armour (UA), which is engaged in designing, development, marketing and distribution of technologically advanced, branded performance products for men, women and youth. This stock hasn’t done much to write home about in 2013, with shares up just 5.5%.

If you look at the chart for Under Armour, you’ll notice that this stock has been modestly uptrending for the last month, with shares moving higher from its low of $46.31 to its recent high of $51.75 a share. During that uptrend, shares of UA have been mostly making higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of UA within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in UA if it manages to break out above some near-term overhead resistance at $51.46 to $51.75 a share and then once it clears its 200-day moving average of $51.95 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 1.77 million shares. If that breakout hits soon, then UA will set up to re-test or possibly take its next major overhead resistance levels at $55.20 to around $60 a share.

Traders can look to buy UA off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $49.13 a share. One can also buy UA off strength once it clears those breakout levels with volume and then simply use a stop that sits a few percentage points below your entry point.

This is a pretty popular ticker among the bears, since the current short interest as a percentage of the float for UA is very high at 16.4%. If that breakout triggers soon, then we could easily see some of those bears rush to cover their short positions and help push shares of UA sharply higher.

LIN TV

Another stock that’s quickly setting up to trigger a near-term breakout trade is LIN TV (TVL), a television station group operator in the U.S. and Puerto Rico. This stock has been on blazing a trail to the upside in 2013, with shares up an impressive 45%.

If you look at the chart for LIN TV, you’ll notice that this stock has been trading in a consolidation pattern for the last month and change, with shares moving between $10.09 on the downside and $11.55 on the upside. This stock has just started to flirt with its 50-day moving average of $10.89 a share, and it’s starting to challenge some near-term overhead resistance at $11.06 a share. That move could quickly develop to a near-term breakout trade for shares of TVL.

Traders should now look for long-biased trades in TVL if it manages to break out above some near-term overhead resistance levels at $11.06 to $11.55 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 485,782 shares. If that breakout triggers soon, then TVL will set up to re-test or possibly take out its next major overhead resistance levels at $12.40 to $13.40 a share. Any high-volume move above $13.40 would then push TVL into new 52-week high territory, which is bullish technical price action. Some possible upside targets off a solid volume move above $13.40 are $14 to $15 a share.

Traders can look to buy TVL off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $10.41 to $10.09 a share. One can also buy TVL off strength once it takes out those breakout levels with volume and then simply use a stop just below its 50-day at $10.89 a share.

Boston Scientific

My final idea for a major breakout trade is Boston Scientific (BSX), which is a developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. This stock is off to a hot start in 2013, with shares up over 36%.

If you look at the chart for Boston Scientific, you’ll notice that this stock has been trending sideways in a consolidation pattern for the last two months, with shares moving between $7.17 on the downside and around $7.70 on the upside. Shares of BSX recently started to bounce off its 50-day moving average of $7.34 a share with massive upside volume. Volume over the past two trading sessions has registered over 40 million shares, which is dramatically higher than its three-month average action of 21.65 million shares. Shares of BSX have also just started to take out some near-term overhead resistance levels at $7.65 to $7.73 a share. That move is quickly pushing shares of BSX within range of triggering a major breakout trade.

Traders should now look for long-biased trades in BSX if it manages to break out above some past overhead resistance levels at $7.91 to $7.96 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 21.65 million shares. If that breakout triggers soon, then BSX will set up to re-test or possibly take out its next major past resistance levels at $9.50 to $11.50 a share. Any high-volume move those levels will then put $13.50 to $14 into range for shares of BSX.

Traders can look to buy BSX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $7.34 a share or right around some key near-term support levels at $7.24 to $7.17 a share. One could also buy BSX off strength once it takes out those breakout levels with volume and then simply use a stop that sits right below its 50-day moving average of $7.34 a share.

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.