Stock Quotes in this Article: ACAD, BSFT, STXS, UBNT, CYNI

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 Dividend Stocks Ready to Pay You More in 2014

One example of a successful breakout trade I flagged recently was technology player Himax Technologies (HIMX), which I featured in Dec. 13's "5 Stocks Ready to Break" at $10.90 share. I mentioned in that piece that shares of HIMX were uptrending strong over the last month and change, with shares moving higher from its low of $8.13 to its recent high of $11.45 a share. During that move, shares of HIMX were consistently making higher lows and higher highs, which is bullish technical price action. That move was starting to push shares of HIMX within range of triggering a major breakout trade above some near-term overhead resistance levels at $11.45 to $11.49 a share.

Guess what happened? Shares of HIMX didn't wait long to trigger that move, since the stock took out those key overhead resistance levels on Dec. 16 with strong upside volume. Volume on that day registered 19.90 million shares, which is well above its three-month average action of 8.39 million shares. This stock has continued to uptrend and soar higher since breaking out, with the stock tagging an intraday high on Friday of $13.14 a share. That represents a solid gain of just over 20% from the time I wrote the article. This breakout has now pushed shares of HIMX into new all-time-high territory, which is bullish technical price action. I don't think the run higher is even close to being over for HIMX, and this stock has a great chance to tag $15 or even $17 in the near future.

>>5 Stocks Under $10 Set to Soar

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 Big Trades for Post-Taper Gains

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

Stereotaxis



One stock that's starting to trend within range of triggering a major breakout trade is Stereotaxis (STXS), which designs, manufactures and markets an advanced cardiology instrument control system for use in a hospital's interventional surgical suite to enhance the treatment of arrhythmias and coronary artery disease. This stock has been trending hot so far in 2013, with shares up sharply by 50%.

>>4 Under-$10 Stocks to Trade for Breakouts

If you take a look at the chart for Stereotaxis, you'll notice that this stock recently formed a major bottoming chart pattern, with buyers coming in to support the shares at $3.10, $3.23 and $3.11 over the last three months. This stock has now started to trend back above its 50-day moving average of $3.64 a share and it's quickly moving within range of triggering a major breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in STXS if it manages to break out above some near-term overhead resistance levels at $4.10 to $4.30 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 1.44 million shares. If that breakout hits soon, then STXS will set up to re-test or possibly take out its next major overhead resistance level at $6.24 a share. Any high-volume move above that level will then give STXS a chance to re-fill some of its previous gap down zone from August that started near $10 a share.

Traders can look to buy STXS off any weakness to anticipate that breakout and simply use a stop that sits right around some near-term support at $3.30 a share. One can also buy STXS off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Cyan


Another stock that's starting to trend within range of triggering a big breakout trade is Cyan (CYNI), which provides carrier-grade networking solutions that transform disparate and inefficient legacy networks into open, high-performance networks. This stock has been destroyed by the bears so far in 2013, with shares off sharply by 60%.

>>5 Stocks With Big Insider Buying

If you take a look at the chart for Cyan, you'll notice that this stock has been trending sideways and consolidating for the last month and change, with shares moving between $3.92 on the downside and $4.47 on the upside. Shares of CYNI are now started to spike higher off some near-term support at $4.14 a share. That move is quickly pushing shares of CYNI within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in CYNI if it manages to break out above some near-term overhead resistance levels at $4.50 to $4.47 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 353,208 shares. If that breakout triggers soon, then CYNI will set up to re-test or possibly take out its next major overhead resistance levels at $5.38 to its 50-day moving average of $5.49 a share. Any high-volume move above those levels will then give CYNI a chance to tag $6, or re-fill some of its previous gap down zone from November that started just above $8 a share.

Traders can look to buy CYNI off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.92 a share. One could also buy CYNI off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

BroadSoft


Another stock that's quickly moving within range of triggering a major breakout trade is BroadSoft (BSFT), a provider of software that enables fixed-line, mobile and cable service providers to deliver hosted, unified communications and other voice and multimedia services over their Internet protocol. This stock has been under pressure from the sellers so far in 2013, with shares off sharply by 27%.

>>4 Stocks Rising on Unusual Volume

If you take a look at the chart for BroadSoft, you'll notice that this stock is spiking sharply higher here right off some near-term support at $25 a share. This spike is quickly pushing shares of BSFT within range of triggering a major breakout trade above some near-term overhead resistance levels. Sitting just above those resistance levels is a monster gap that shares of BSFT could easily soar higher into if that breakout triggers soon.

Traders should now look for long-biased trades in BSFT if it manages to break out above some near-term overhead resistance levels at $26.85 to $26.97 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 497,089 shares. If that breakout triggers soon, then BSFT will set up to re-fill some of its previous gap down zone from November that started just below $34 a share.

Traders can look to buy BSFT off any weakness to anticipate that breakout and simply use a stop that sits right around some near-term support levels at $25 or at $24 a share. One can also buy BSFT off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Ubiquiti Networks



Another stock that's quickly moving within range of triggering a major breakout trade is Ubiquiti Networks (UBNT), which develops high performance networking technology for service providers & enterprises. This stock has been a favorite target of the bulls so far in 2013, with shares up huge by 249%.

>>5 Hated Earnings Stocks You Should Love

If you look at the chart for Ubiquiti Networks, you'll notice that this stock recently formed a double bottom chart pattern at $36.72 to $36.30 a share. Following that bottom, shares of UBNT have started to uptrend and move back above its 50-day moving average of $39.84 a share. Shares of UBNT have also started to break out above some near-term overhead resistance at $40.59 a share. That move is quickly pushing this stock within range of triggering an even bigger breakout trade.

Traders should now look for long-biased trades in UBNT if it manages to break out above its all-time high at $44.80 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume 917,916 shares. If that breakout hits soon, then UBNT will set up to enter new all-time high territory, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55, or even $60 a share.

Traders can look to buy UBNT off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $39.85 a share. One can also buy UBNT off strength once it starts to take $44.80 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Acadia Pharmaceuticals


My final breakout trading prospect is biopharmaceutical player Acadia Pharmaceuticals (ACAD), which is in the business of development and commercialization of small molecule drugs for the treatment of central nervous system disorders. This stock has been firing on all cylinders so far in 2013, with shares up a monster amount of 423%.

>>4 Big Stocks on Traders' Radars

If you look at the chart for Acadia Pharmaceuticals, you'll notice that this stock has been trending sideways for the last two months, with shares moving between $20.13 on the downside and $25.77 on the upside. Over the last few weeks, shares of ACAD have started to uptrend and move back above its 50-day moving average of $22.98 a share. That move is quickly pushing shares of ACAD within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.

Traders should now look for long-biased trades in ACAD if it manages to break out above some near-term overhead resistance levels at $25 to $25.77 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 2.44 million shares. If that breakout triggers soon, then ACAD will set up to re-test or possibly take out its next major overhead resistance levels at $28 to its 52-week high at $29.73 a share. Any high-volume move above those levels will then give ACAD a chance to trend north of $30 a share.

Traders can look to buy ACAD off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $22.98 a share, or near more support at $22 a share. One can also buy ACAD off strength once it starts to take out 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:







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.