Stock Quotes in this Article: AMRI, ANAD, IPXL, STEC, SCTY

MADISON, 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 Stec (STEC), which I featured in May 31's "5 Breakout Stocks Ready to Surge Higher" at around $3.60 a share. I mentioned in that piece that STEC had been downtrending badly from its March high of $5.61 to its recent low of $3.32 a share. During that move, the stock was consistently making lower highs and lower lows, which is bearish price action. That said, shares of STEC were just starting to find some buying interest at around $3.40 to $3.50 a share, and it was looking poised to reverse its downtrend and break out and trend higher. That breakout would trigger if STEC managed to take out some near-term overhead resistance levels at its 50-day moving average of $3.81 a share and then above more resistance at $3.90 a share.

Guess what happened? Shares of STEC didn't wait long to trigger that breakout after I wrote the piece. The stock bounced around for a few weeks between $3.30 and $3.70 a share, and then on June 21, it closed back above its 50-day moving average. The following trading session saw shares of STEC exploded to the upside by over 80% with monster upside volume. This stock hit an intraday high that day of $6.82 a share, after Western Digital (WDC) announced that it had entered into a definitive merger agreement under which Western Digital's HGST unit will acquire STEC for $6.85 per share in cash. Breakout traders were rewarded handsomely on this play had they anticipated the move based on attractive chart setup prior to the buyout.

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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.

Albany Molecular Research

One stock that's quickly moving within range of triggering a big breakout trade is Albany Molecular Research (AMRI), a contract research and manufacturing organization providing customers drug discovery, development and manufacturing services. This stock has been on fire so far in 2013, with shares up sharply by 131%.

If you take a look at the chart for Albany Molecular Research, you'll notice that this stock has been trending sideways for the last two months, with shares moving between $9.95 on the downside and $12.50 on the upside. Shares of AMRI have just recently started to bounce higher off its 50-day moving average at $11.12 a share and are now quickly moving within range of triggering a big breakout trade, which will hit if AMRI manages to take out the upper end of its recent sideways trading chart pattern.

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Traders should now look for long-biased trades in AMRI if it manages to break out above some near-term overhead resistance levels at $12.46 to its 52-week high at $12.50 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 425,164 shares. If that breakout triggers soon, then AMRI 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, or even $20 a share.

Traders can look to buy AMRI off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $11.12 a share or below some more key near-term support at $10.50 a share. One could also buy AMRI 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.

Anadigics

Another stock that looks poised to trigger a near-term breakout trade is Anadigics (ANAD), which designs and manufactures radio frequency semiconductor solutions for cellular wireless, WiFi and infrastructure applications. This stock is off to a weak start in 2013, with shares off by 12.7%.

If you take a look at the chart for Anadigics, you'll notice that this stock has been uptrending for the last two months, with shares moving higher from its low of $1.67 to its recent high of $2.34 a share. During that uptrend, shares of ANAD have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ANAD within range of triggering a near-term breakout trade.

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Market players should now look for long-biased trades in ANAD if it manages to break out above some near-term overhead resistance levels at $2.23 to $2.34 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 699,164 shares. If that breakout triggers soon, then ANAD will set up to re-test or possibly take out its next major overhead resistance levels at $2.87 to $3.22 a share. Any high-volume move above those levels will then put its next major overhead resistance level at $3.44 into range for shares of ANAD.

Traders can look to buy ANAD off any weakness to anticipate that breakout and simply use a stop that sits right below its 200-day at $1.91 a share, or below some more key near-term support at $1.80 a share. One could also buy ANAD 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.

EntreMed

Another stock that's quickly moving within range of triggering a major breakout trade is EntreMed (ENMD), which is a clinical-stage pharmaceutical company, which develops therapeutic candidates for the treatment of cancer and inflammation. This stock is off to a hot start so far in 2013, with shares up by 49%.

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If you look at the chart for EntreMed, you'll notice that this stock has been uptrending modestly for the last month, with shares moving higher from its low of $1.83 to its recent high of $2.14 a share. During that uptrend, shares of ENMD have been mostly making higher lows and higher highs, which is bullish technical price action. Also, the upside volume for ENMD tracked in strong on Thursday, after 195,000 shares traded hands versus its three-month average volume of 50,189 shares. That action has now pushed shares of ENMD within range of triggering a major breakout trade.

Market players should now look for long-biased trades in ENMD if it manages to break out above some near-term overhead resistance levels at $2.14 to $2.38 a share and then once it clears some past resistance at $2.40 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 50,189 shares. If that breakout triggers soon, then ENMD will set up to re-test or possibly take out its next major overhead resistance level at $3 to $3.73 a share. Any high-volume move above $3.73 will then put its next major overhead resistance level at $5 into range for shares of ENMD.

Traders can look to buy ENMD off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $1.83 a share. One can also buy ENMD 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.

Impax Laboratories

Another stock that's starting to move within range of triggering a major breakout trade is Impax Laboratories (IPXL), which is focused on the development and commercialization of bioequivalent and brand-name pharmaceuticals, utilizing its controlled-release and other in-house development. This stock hasn't done much so far in 2013, with shares down by 4.8%.

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If you look at the chart for Impax Laboratories, you'll notice that this stock has been uptrending strong for the last four months, with shares soaring higher from its low of $14.41 to its recent high of $19.95 a share. During that uptrend, shares of IPXL have been consistently making higher lows and higher highs, which is bullish technical price action. Also, the upside volume for IPXL has started to track in strong over the last few trading sessions, with 1.5 million, 1.6 million and 1.3 million shares traded versus its three-month average daily volume of 1.05 million shares. That action has now pushed shares of IPXL within range of triggering a major breakout trade.

Traders should now look for long-biased trades in IPXL if it manages to break out above its 200-day moving average at $20.05 share and then once it takes out some past overhead resistance levels at $20.90 to $22.38 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 1.05 million shares. If that breakout triggers soon, then IPXL will set up to re-fill some of its previous gap down zone from last October that started near $25 a share. If that gap gets filled with strong volume, then IPXL could re-test or take out its 52-week high at $27.25 a share.

Traders can look to buy IPXL off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average at $18.15 a share. One can also buy IPXL 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.

SolarCity

My final breakout trading idea is SolarCity (SCTY), which is engaged in the design, 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 red hot so far in 2013, with shares up a whopping 209%.

If you look at the chart for SolarCity, you'll notice that this stock has been trending sideways for the last month, with shares moving between $32.66 on the downside and $39.07 a share on the upside. Shares of SCTY have recently started to bounce higher off its 50-day moving average at $34.53 a share and it's now quickly moving within range of triggering a near-term breakout trade. That trade will hit if SCTY manages to take out the upper end of its recent sideways trading chart pattern.

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Traders should now look for long-biased trades in SCTY if it manages to break out above some near-term overhead resistance levels at $38.88 to $39.07 a share and then once it clears more resistance levels at $39.59 to $40 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 2.15 million shares. If that breakout triggers soon, then SCTY will set up to re-test or possibly take out its next major overhead resistance levels at $45 to $50 a share. Any high-volume move above those levels will then put its 52-week high at $52.77 into range for shares of SCTY.

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 at $34.53 a share or right below some more key near-term support at $32.66 a share. One could also buy SCTY 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.

This stock is a favorite target of the short-sellers, since the current short interest as a percentage of the float for SCTY is extremely high at 18.3%. The bears have also been increasing their bets from the last reporting period by 8%, or by about 334,000 shares. If the bears are caught pressing their bets into a future breakout, then SCTY could easily see a sharp short-squeeze that sends the stock sharply higher from current levels.

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

-- Written by Roberto Pedone in Madison, Wis. 

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

Roberto Pedone, based out of Madison, 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.