Stock Quotes in this Article: BSPM, KGJI, NQ, MEIP, DXM

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 who can ultimately push the stock significantly higher.

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One example of a successful breakout trade I flagged recently was specialty retailer Coldwater Creek (CWTR), which I featured in Jan. 24's "5 Stocks Ready to Break Out" 74 cents per share. I mentioned in that piece that shares of CWTR recently formed a double-bottom chart pattern at 66 cents to 67 cents per share. The stock was starting to bounce off those support levels and it was showing relative strength on a big down day. That bounce was starting to push shares of CWTR within range of triggering a big breakout trade above some near-term overhead resistance levels at 82 to 84 cents per share.

Guess what happened? Shares of CWTR didn't wait long to trigger that breakout, since the stock took out those key overhead resistance levels on Jan. 27 with strong upside volume flows. This stock broke out and continued to soar higher with shares of CWTR tagging an intraday high on Jan. 29 of 97 cents per share. That represents a gain of right around 30% from the 74-cent level for anyone who bought the stock in anticipation of that breakout. CWTR has now pulled back to right above its 50-day moving average of 82 cents per share, which could offer another good entry point if that level holds.

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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.

Biostar Pharmaceuticals


One stock that's starting to trend within range of triggering a big breakout trade is Biostar Pharmaceuticals (BSPM), which engages in the development, manufacture, and marketing of over-the-counter and prescription pharmaceutical products for various diseases and conditions in the People's Republic of China. This stock has been on fire over the last three months, with shares soaring by a whopping 85%.

If you take a look at the chart for Biostar Pharmaceuticals, you'll notice that this has been trending sideways and consolidating over the last two months, with shares moving between $1.75 on the downside and $2.66 on the upside. Shares of BSPM have just started to bounce off the lower end its range the last few trading sessions, with the stock spiking from $1.77 to its high of $2.25 a share. That bounce is starting to push shares of BSPM within range of triggering a big breakout trade.

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Traders should now look for long-biased trades in BSPM if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $2.13 a share to some more near-term overhead resistance at $2.25 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 458,935 shares. If that breakout hits soon, then BSPM will set up to re-test or possibly take out its next major overhead resistance levels at $2.66 to $3 a share. Any high-volume move above those levels will then give BSPM a chance to re-test or possibly take out its 52-week high at $3.44 a share.

Traders can look to buy BSPM off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.77 to $1.75 a share. One can also buy BSPM 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.

MEI Pharma


A development-stage oncology player that's quickly moving within range of triggering a major breakout trade is MEI Pharma (MEIP), which focuses on the clinical development of therapeutics for the treatment of cancer. This stock has trended modestly higher over the last three months, with shares up around 4%.

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If you take a look at the chart for MEI Pharma, you'll notice that this stock has been trending sideways and consolidating for the last three months, with shares moving between $7.30 on the downside and $8.94 on the upside. This stock is just starting to spike modestly higher right off both its 200-day moving average of $8.22 and its 50-day moving average of $8.25 a share. That spike is starting to push shares of MEIP 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 MEIP if it manages to break out above some key near-term overhead resistance levels at $8.68 to $8.94 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 130,103 shares. If that breakout triggers soon, then MEIP will set up to re-test or possibly take out its next major overhead resistance levels at $10 to $10.95 a share. Any high-volume move above $10.95 will then give MEIP a chance to tag $11.50 a share.

Traders can look to buy MEIP off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $8 or $7.50 a share. One could also buy MEIP 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.

NQ Mobile


Another technology player that's starting to trend within range of triggering a big breakout trade is NQ Mobile (NQ), which  provides mobile Internet services in the areas of mobile security, privacy, productivity, personalized cloud and family protection. This stock is off to a decent start in 2014, with shares up notably by 12.7%.

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If you take a look at the chart for NQ Mobile, you'll notice that this stock has been uptrending strong for the last two months, with shares moving higher from its low of $10.53 to its recent high of $18.50 a share with strong upside volume flows. During that uptrend, shares of NQ have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NQ within range of triggering a big breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in NQ if it manages to break out above some near-term overhead resistance levels at $18 to $18.50 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 5.15 million shares. If that breakout triggers soon, then NQ will set up to re-test or possibly take out its next major overhead resistance levels at $22 to $24 a share.

Traders can look to buy NQ off any weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support at $14.28 a share, or around its 200-day moving average of $13.74 a share. One can also buy NQ 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.

Kingold Jewelry


Another stock that's uptrending and starting to move within range of triggering a major breakout trade is Kingold Jewelry (KGJI), which engages in the design, manufacture and sale of gold jewelry, ornaments and investment-oriented products in the People's Republic of China This stock is off to a strong start in 2014, with shares up around 12.5%.

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If you look at the chart for Kingold Jewelry, you'll notice that this stock has been uptrending strong over the last month, with shares moving higher from its low of $1.52 to its recent high of $1.98 a share. During that uptrend, shares of KGJI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of KGJI within range of triggering a major breakout trade.

Traders should now look for long-biased trades in KGJI if it manages to break out above some near-term overhead resistance at $1.98 a share and then once it clears some past overhead resistance levels at $2.05 to $2.20 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 215,384 shares. If that breakout hits soon, then KGJI will set up to re-test or possibly take out its 52-week high at $2.45 a share. Any high-volume move above that level will then give KGJI a chance to tag $3 to $3.50 a share.

Traders can look to buy KGJI off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.73 to $1.63 a share. One can also buy KGJI 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.

Dex Media


My final breakout trading prospect is marketing services player Dex Media (DXM), which provides local, social, and mobile marketing solutions to businesses in communities across the U.S. under the Dex One and SuperMedia brands. This stock has been hammered by the bears over the last six months, with shares down by a whopping 59%.

If you look at the chart for Dex Media, you'll notice that this stock has recently formed a double bottom chart pattern at $5.71 to $5.66 a share right below its 50-day moving average of $6.25 a share. Shares of DXM are now starting to spike higher off those double bottom support zones and that spike is quickly pushing shares of DXM within range of triggering a major breakout trade.

Traders should now look for long-biased trades in DXM if it manages to break out above some near-term overhead resistance levels at $6.13 to $6.66 a share and then above more resistance at $7.06 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 401,668 shares. If that breakout triggers soon, then DXM will set up to re-test or possibly take out its next major overhead resistance levels at $8 to $9.31 a share. Any high-volume move above those levels will then give DXM a chance to tag its next major overhead resistance levels at $10 to its 200-day moving average at $10.77 a share.

Traders can look to buy DXM off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $5.66 or at $5.27 a share. One can also buy DXM off strength once it starts to clear 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.


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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.