Stock Quotes in this Article: HIMX, LRN, SCTY, MKTO, ADHD

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.

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One example of a successful breakout trade I flagged recently was biopharmaceutical player Coronado Biosciences (CNDO), which I featured in Dec. 9's "5 Stocks Poised for Breakouts" at $1.74 share. I mentioned in that piece that shares of CNDO had started to uptrend recently off its low of $1.25 a share, after gapping down huge from $7 a share in October. That uptrend was quickly pushing shares of CNDO within range of triggering a major breakout trade above some near-term overhead resistance levels at $1.86 to $1.88 a share, and then above more key resistance levels at $1.91 to its gap-down-day high of $2.16 a share.

Guess what happened? Shares of CNDO started to flirt with that breakout the same day my article was published, after the stock hit an intraday high on Dec. 9 of $1.95 a share. This stock continued to flirt with breakout territory on Dec. 10, after it hit an intraday high of $2.01 a share. Share of CNDO stop the flirting this morning as the stock took out all of those overhead resistance levels with massive upside volume. At last check, CNDO has tagged an intraday high today of $2.70 a share, which represents a monster gain of over 50% in a very short timeframe. As you can see here, CNDO made a huge move after it busted higher into its large gap down zone with heavy upside volume.

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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.

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

K12

One stock that's starting to trend within range of triggering a major breakout trade is K12 (LRN), which offers proprietary curriculum and educational services created for online delivery to students in kindergarten through 12th grade. This stock has been a top target of the bears over the last three months, with shares down sharply by 43%.

If you take a look at the chart for K12, you'll notice that this stock has been trending sideways for the last month, with shares moving between $19.47 on the downside and $21.62 on the upside. Shares of LRN have now just started to spike higher back above its 50-day moving average of $20.09 a share. That move is quickly pushing shares of K12 within range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern.

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Traders should now look for long-biased trades in LRN if it manages to break out above some near-term overhead resistance levels at $20.77 to $21.17 a share, and then once it takes out more key overhead resistance at $21.62 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 519,295 shares. If that breakout hits soon, then LRN will set up to re-fill some of its previous gap down zone form October that started just above $28 a share. This stock could easily make a monster move if it breaks out into that gap with volume, just like CNDO did.

Traders can look to buy LRN off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $19.47 or around $19 a share. One can also buy LRN 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.

Alcobra

A biopharmaceutical stock that's starting to trend within range of triggering a big breakout trade is Alcobra (ADHD), which is engaged in the development and commercialization of its proprietary drug, MG01CI, to treat attention deficit hyperactivity disorder. This stock has been on fire so far in 2013, with shares up huge by 126%.

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If you take a look at the chart for Alcobra, you'll notice that this stock has been trending sideways and consolidating over the last month and change, with shares moving between $14.78 on the downside and $18.75 on the upside. Shares of ADHD have now started to uptrend a bit over the last few weeks, with shares moving higher from its low of $15.05 to its recent high of $18.45 share. That move has started to push shares of ADHD 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 ADHD if it manages to break out above its 50-day moving average of $17.79 a share, and then once it takes out some more key overhead resistance levels at $18.45 to $18.75 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 74,869 shares. If that breakout triggers soon, then ADHD will set up to re-test or possibly take out its next major overhead resistance levels at $22 to $24 a share. Any high-volume move above those levels will then give ADHD a chance to re-test or possibly take out its all-time high at $26.96 a share.

Traders can look to buy ADHD off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $16.17 to $15.05 a share, or around $14.78 a share. One could also buy ADHD 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.

Himax Technologies

A technology player that's quickly moving within range of triggering a major breakout trade is Himax Technologies (HIMX), which designs, develops and markets semiconductors that are critical components of flat panel displays. This stock has been on fire so far in 2013, with shares up a whopping 355%.

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If you take a look at the chart for Himax Technologies, you'll notice that this stock has been 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 uptrend, shares of HIMX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of HIMX within range of triggering a major breakout trade.

Traders should now look for long-biased trades in HIMX if it manages to break out above some near-term overhead resistance levels at $11.45 a share to its 52-week high at $11.49 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 8.63 million shares. If that breakout triggers soon, then HIMX will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $14 to $15 a share.

Traders can look to buy HIMX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $10.02 a share, or near more support at $9.50 a share. One can also buy HIMX 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.

SolarCity

Another renewable energy player that's starting to trend within range of triggering a near-term breakout trade is SolarCity (SCTY), which is engaged in designing, sales, engineering, installation, monitoring, maintenance and financing of solar energy systems to residential and commercial customers, and sale of electricity generated by solar energy systems to customers. This stock has been a favorite target of the bulls so far in 2013, with shares up big time by 341%.

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If you look at the chart for SolarCity, you'll notice that this stock has been uptrending strong over the last few weeks, with shares moving higher from its low of $42.38 to its recent high of $55.69 a share. During that uptrend, shares of SCTY have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of SCTY are now starting to bounce higher off its 50-day moving average of $51.54 a share and it's quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in SCTY if it manages to break out above some near-term overhead resistance at $55.69 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 of 5.21 million shares. If that breakout hits soon, then SCTY will set up to re-test or possibly take out its next major overhead resistance level at $59.64 a share. Any high-volume move above $59.64 will then give SCTY a chance to re-test or possibly take out its 52-week high at $65.30 a share.

Traders can look to buy SCTY off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $51.54 a share, or just below more near-term support at $49.45 a share. One can also buy SCTY off strength once it starts to take $55.69 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Marketo

My final breakout trading prospect is application software player Marketo (MKTO), which provides a cloud-based marketing software platform that enables organizations to engage in modern relationship marketing. This stock is off to a very strong start in 2013, with shares up sharply by 42%.

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If you look at the chart for Marketo, you'll notice that this stock just recently formed a triple bottom chart pattern, since shares found buying interest over the last month at $29.02, $28.31 and $29.44 a share. Shares of MKTO have now started to spike sharply higher just above those support levels and its moving back above its 50-day moving average of $32.57 a share. That move is quickly pushing shares of MKTO within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in MKTO if it manages to break out above some near-term overhead resistance at $34.06 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 action of 462,734 shares. If that breakout triggers soon, then MKTO will set up to re-test or possibly take out its next major overhead resistance levels at $37.43 to its all-time high at $39.80 Any high-volume move above $39.80 will then push shares of MTKO into new all-time high territory, which is bullish technical price action. This stock could easily tag $45 a share if it trades into all-time high territory with bullish upside volume flows.

Traders can look to buy MKTO off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $29.44 or at $28.31 a share. One can also buy MKTO off strength once it starts to take out $34.06 a share 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.

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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.