Stock Quotes in this Article: FIO, RLD, DANG, NPTN, BIOL

 DELAFIELD, Wis. (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.

>>5 Dogs of the Dow to Stomp the Market

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.

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.

>>5 Stocks Under $10 Set to Soar

With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.

RealD

One entertainment production equipment player that's starting to move within range of triggering a big breakout trade is RealD (RLD), which is a licensor of 3D technologies. This stock has been hit hard by the sellers so far in 2013, with shares off by 37%.

>>5 Big Stocks to Trade for Big Gains

If you take a look at the chart for RealD, you'll notice that this stock has been destroyed by the bears over the last four months and change, with shares plunging from its 52-week high of $16.05 to its 52-week low of $6.19 a share. During that downtrend, shares of RLD have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of RLD might be ready to see its downside volatility end in the short-term, since the stock is starting to stabilize and move within range of triggering a big breakout trade.

Traders should now look for long-biased trades in RLD if it manages to break out above some near-term overhead resistance levels at $7.17 to $7.45 a share, and then once it clears its 50-day moving average at $7.66 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 447,771 shares. If that breakout hits soon, then RLD will set up to re-test or possibly take out its next major overhead resistance levels at $8.26 to $9 a share. Any high-volume move above those levels will then give RLD a chance to tag $10 to $11 a share.

Traders can look to buy RLD off any weakness to anticipate that breakout and simply use a stop that sits right around its 52-week low at $6.19 a share. One can also buy RLD off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Fusion-IO

Another technology player that looks ready to trigger a big breakout trade is Fusion-IO (FIO), which is a provider of data-centric computing solutions. This stock has been hammered by the bears so far in 2013, with shares off by 38%.

>>5 Stocks With Big Insider Buying

If you take a look at the chart for Fusion-IO, you'll notice that this stock has been uptrending modestly over the last month, with shares moving higher from its low of $13.05 to its recent high of $14.78 a share. During that uptrend, shares of FIO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of FIO within range of triggering a big breakout trade.

Traders should now look for long-biased trades in FIO if it manages to break out above some near-term overhead resistance levels at $14.40 to $14.90 a share, and then once it takes out its 200-day moving average at $15.22 a share to more resistance at $15.50 to $16 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 3.69 million shares. If that breakout hits soon, then FIO will set up to re-fill some of its previous gap down zone from May that started near $19 a share. Shares of FIO could even tag $20 to $22 if that gap gets filled with strong upside volume flows.

Traders can look to buy FIO off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $13.55 to $13 a share. One could also buy FIO off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Biolase

One health care player that's starting to trend within range of triggering a major breakout trade is Biolase (BIOL), which is a medical technology company that develops, manufactures and markets laser systems for dental and medical applications. This stock is off to a decent start in 2013, with shares up 12%.

>>4 Stocks Rising on Unusual Volume

If you take a look at the chart for Biolase, you'll notice that this stock has been trending sideways and consolidating for the last two months, with shares moving between $1.64 on the downside and $2.24 on the upside. Shares of BIOL have now started to spike higher right off its 200-day moving average of $1.87 a share. That spike is quickly pushing shares of BIOL within range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in BIOL if it manages to break out above some near-term overhead resistance levels at $2.15 to $2.24 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 627,655 shares. If that breakout triggers soon, then BIOL will set up to re-test or possibly take out its next major overhead resistance levels at $3.50 to $4 a share.

Traders can look to buy BIOL off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.85 to $1.80 a share. One can also buy BIOL off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

E-Commerce China Dangdang

Another e-commerce player that's quickly moving within range of triggering a big breakout trade is E-Commerce China Dangdang (DANG), which is engaged in selling books online. It is also engaged in other media products and selected general merchandise categories. This stock has been on fire so far in 2013, with shares up a whopping 170%.

>>7 Chinese ADRs That Are on Fire Right Now

If you look at the chart for E-Commerce China Dangdang, you'll notice that this stock has been uptrending strong for the last month and change, with shares soaring higher from its low of $7.68 to its recent high of $12.19 a share. During that uptrend, shares of DANG have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of DANG within range of triggering a big breakout trade.

Traders should now look for long-biased trades in DANG if it manages to break out above some near-term overhead resistance levels at $11.50 to its 52-week high at $12.19 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 3.15 million shares. If that breakout triggers soon, then DANG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $15 to $17 a share.

Traders can look to buy DANG off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average at $9.71 a share. One can also buy DANG off strength once it takes out that breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

NeoPhotonics

My final breakout trading prospect is technology player NeoPhotonics (NPTN), which is a designer and manufacturer of PIC-based modules and subsystems for bandwidth-intensive, high-speed communications networks. This stock is off to a strong start in 2013, with shares up sharply by 31%.

>>The Pros Hate These 5 Stocks -- Should You?

If you look at the chart for NeoPhotonics, you'll notice that this stock has been uptrending strong for the last two months and change, with shares moving higher from its low of $6.20 to its recent high of $7.75 a share. During that uptrend, shares of NPTN have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NPTN within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in NPTN if it manages to break out above some near-term overhead resistance levels at $7.58 to $7.75 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 129,108 shares. If that breakout triggers soon, then NPTN will set up to re-test or possibly take out its next major overhead resistance levels at $8.72 to its 52-week high at $9.77 a share. Any high-volume move above $9.77 will then give NPTN a chance to tag $11 to $12 a share.

Traders can look to buy NPTN off any weakness to anticipate that breakout and simply use a stop that sits right below either its 50-day moving average at $7.04 or its 200-day moving average at $6.65 a share. One could also buy NPTN off strength once it clears those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>5 Stocks Set to Soar on Bullish Earnings
>>5 Stocks Under $10 to Trade for Breakouts

>>5 Rocket Stocks to Buy This Earnings Season

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., 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.