Stock Quotes in this Article: AAPL, AFFY, AGQ, HLF, OXBT

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 biotechnology and drugs player Affymax (AFFY), which I featured in Mar. 1’s “5 Stocks Poised for Breakouts” at around $2.66 a share. Shares of AFFY had gapped down huge from $16 to $2.34 a share with massive downside volume. That beat-down pushed shares of AFFY into extremely oversold territory, and AFFY’s relative strength index reading hit 11.33. Just because a stock is oversold doesn’t mean it will snap back, but experienced traders know that you can get powerful bounces when they do. I told readers to watch for a breakout trade to trigger if AFFY managed to clear some near-term overhead resistance at $2.82 a share with high volume.

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Guess what happened? Shares of AFFY triggered that breakout on Thursday with massive upside volume. The stock exploded to the upside and hit an intraday high of $4.10 a share, which represents an enormous gain for anyone who pulled the trigger on that breakout. Volume on Thursday registered 45 million shares, which is well above AFFY’s three-month average action of 3.40 million shares. The uptrend might not be over for AFFY, so traders should look for the next breakout to trigger if AFFY can clear $4.10 a share with high volume. I would use today’s low of $3.22 a share to key off of for near-term support.

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.

Apple

One stock that’s trending very close to triggering a major breakout trade is Apple (AAPL), which designs, manufactures and markets personal computers, mobile communication devices and portable digital music and video players and sells a variety of related software, services, peripherals and networking solutions. This stock has been hammered by the bears during the last six months, with shares off sharply by 36%.

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If you take a look at the chart for Apple, you’ll notice that this stock has been downtrending badly for the last six months, with shares falling from around $700 to its recent 52-week low of $419 a share. During that downtrend, shares of AAPL have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of AAPL are starting to bounce higher above that $419 low and its quickly approaching a major breakout trade above a key downtrend line.

Traders should now look for long-biased trades in AAPL if it manages to break out above some near-term overhead resistance levels at $435.25 to $440 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 19.86 million shares. If that breakout triggers soon, then AAPL will set up to re-test or possibly take out its next major overhead resistance levels at $452 to $455 a share. Any high-volume move above those levels will then put its 50-day at $473.81 to more resistance at $484.94 into range for shares of AAPL.

Traders can look to buy AAPL off any notable weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $421.06 to $419 a share. One could also buy off strength once AAPL takes out those breakout levels with volume and then simply use a stop that sits a few percentage points below $435 a share.

Keep in mind that if AAPL does trigger this breakout with volume, then I think we could see a powerful move higher since a downtrend line breakout is known to produce powerful moves to the upside.

ProShares Ultra Silver

Another stock that’s trending within range of triggering a near-term breakout trade is ProShares Ultra Silver (AGQ), which seeks to provide daily investment results that correspond to twice the daily performance of silver as measured by the U.S. dollar fixing price for delivery in London. This stock has been trending to the downside in the last six months, with shares off by 28%.

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If you take a look at the chart for ProShares Ultra Silver, you’ll notice that this highly-leveraged ETF has been downtrending for the last two months, with shares dropping from its high of $50.14 to its recent low of $37.79 a share. During that downtrend, shares of AGQ have been mostly making lower highs and lower lows, which is bearish technical price action. That said, AGQ has just started to bounce off that $37.79 low and is quickly moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in AGQ if it manages to break out above some near-term overhead resistance levels at $39.90 to $41 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 1.39 million shares. If that breakout triggers soon, then we could see a powerful bounce higher that takes AGQ back towards $50 to $55 a share.

Traders can look to buy AGQ off any weakness to anticipate that breakout and simply use a stop that sits close to some near-term support levels at $38.07 to $37.79 a share. One could also buy off strength once AGQ clears those breakout levels with volume and then simply use a stop that sits just below $38.07 a share or one that’s a few percentage points below your entry. I would add to either position once AGQ clears its 50-day at $44.03 and its 200-day at $46.13 with heavy upside volume.

QuinStreet

Another stock that’s quickly moving within range of triggering a near-term breakout trade is QuinStreet (QNST), an online media and marketing company that provides vertically oriented customer acquisition programs for its clients. This stock has been dumped by the sellers during the last six months, with shares off sharply by 30%.

If you look at the chart for QuinStreet, you’ll see that this stock has just started to move back above its 50-day moving average at $6 a share. This move is quickly pushing shares of QNST within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in QNST once it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $6 a share and then once it clears more overhead resistance at $6.20 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 122,058 shares. If that breakout triggers soon, then QNST will set up to re-test or possibly take its next major overhead resistance levels at $6.65 to $6.95 a share. Any high-volume move above those levels will then put its 200-day moving average of $7.53 into range for shares of QNST.

Traders can look to buy QNST off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $5.56 a share. One can also buy QNST off strength once it clears those breakout levels with volume and then simply use a stop that sits a few percentage points below its 50-day moving average of $6 a share.

Keep in mind that this stock is popular among the short sellers, since the current short interest as a percentage of the float for QNST is rather high at 9%. If that breakout triggers soon, then I think we could see a short-squeeze develop for shares of QNST.

Oxygen Biotherapeutics

Another stock that’s moving within range of triggering a major breakout trade is Oxygen Biotherapeutics (OXBT), which is engaged in the business of developing biotechnology products with a focus on oxygen delivery to tissue. This stock has been destroyed by the sellers so far in 2013, with shares off by 58%.

If you look at the chart for OXBT, you’ll notice that this stock has been downtrending badly for the last month and change, with shares dropping from its high of 80 cents per share to its recent low of 25 cents per share. During that downtrend, shares of OXBT have been consistently making lower highs and lower lows, which is bearish technical price action. That move has pushed OXBT into oversold territory, since its current relative strength index reading is 28.24. Oversold can always get more oversold, but it’s also an area where a stock can produce a powerful bounce higher from. Shares of OXBT have started to bounce off that 25 cents per share low and are quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in OXBT once it manages to break out above some near-term overhead resistance levels at 27 cents to 32 cents per 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 48,154 shares. If that breakout triggers soon, then OXBT could produce a massive oversold bounce that takes this stock back towards 40 cents to 50 cents per share. It’s even possible for OXBT to re-test its 50-day moving average of 57 cents per share.

Traders should note that the volume today for OXBT has already hit over 700,000 shares with the stock up 7.8% to 27 cents per share. That oversold bounce could already be underway.

Traders can look to buy OXBT off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at 25 cents per share. One can also buy off strength once OXBT takes out those breakout levels with volume and then simply use the same stop around 25 cents per share.

Herbalife

My final idea for a breakout trade today is Herbalife (HLF), a global nutrition company that sells weight management, sports and fitness, energy and targeted nutritional products as well as personal care products. This stock has been on fire during 2013, with shares up 24.8%.

If you look at the chart for Herbalife, you’ll notice that this stock has been uptrending strong for the last month or so, with shares trending higher from its recent low of $34.52 to its intraday high of $42.17 a share. During that uptrend, shares of HLF have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed HLF back above its 50-day moving average of $38.27 a share and it’s quickly moving the stock within range of triggering a near-term breakout trade above a key downtrend line.

Traders should now look for long-biased trades in HLF once it manages to break out above some near-term overhead resistance levels at $41.89 volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 10.80 million shares. If that breakout triggers soon, then HLF could produce a powerful bounce higher that takes this stock back towards $45 to $49 a share. Any high-volume move above $49 will then put $53 to $56 into range for shares of HLF.

Traders can look to buy HLF off any weakness to anticipate that breakout and simply use a stop that sits right below some near-term support at $39.62 a share or around its 50-day moving average at $38.27 a share. One can also look to buy HLF off strength once it takes out $41.89 a share with volume and then simply use a stop that sits just below $39.62 a share. I would add to either position once HLF clears its 200-day moving average at $45.76 a share with high volume, and then above more near-term resistance at $47 to $49 a share.

Traders should make note that the current short interest as a percentage of the float for HLF is extremely high at 31.6%. This stock could easily experience a monster short-squeeze if that breakout triggers soon with volume, so make sure to put HLF on your breakout trading radar.

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.