Stock Quotes in this Article: DKS, LIVE, PRKR, ZNGA, VJET, KING

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 on May 30 at $14.30 a share was 3D printing player Voxeljet (VJET). I mentioned in that piece the stock had been consolidating and trending sideways for a few weeks, with shares moving between its 52-week low of $12.85 on the downside and right around $15 on the upside. This stock was starting to bounce higher off its 52-week low and was quickly moving within range of triggering a breakout trade above the upper-end of its recent sideways trading chart pattern.

Guess what happened? Shares Voxeljet triggered that breakout in mid-June with strong upside volume flows. This stock took out the upper-end of that previous range and it spiked back above its 50-day moving average. Shares of VJET have continued to soar higher since triggering that breakout, with the stock tagging an intraday high today of $19.75 a share. That represents a large gain of close to 40% for anyone who bought shares of VJET in anticipation of the breakout. As you can see, trading breakouts that triggering with strong volume and produce large profits in very short timeframes.

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.

Parkervision

One technology player that's starting to trend within range of triggering a big breakout trade is Parkervision (PRKR), which designs, develops and markets proprietary radio frequency technologies and products for use in semiconductor circuits for wireless communication products in the U.S. This stock is has been hammered lower by the short-sellers so far in 2014, with shares down by 65%.

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If you take a look at the chart for Parkervision, you'll notice that this stock recently gapped down sharply from over $5 to its recent low of $1.21 a share with heavy downside volume. That move has now pushed shares of PRKR into extremely oversold territory, since its current relative strength index reading is 18. Oversold can always get more oversold, but it's also an area where a stock can experience a sharp rebound higher from. Following that massive selloff, shares of PRKR have started to stabilize a bit right around $1.50 a share and it's now trending within range of triggering a big breakout trade.

Traders should now look for long-biased trades in PRKR if it manages to break out above Friday's intraday high of $1.62 and then once it clears some key near-term overhead resistance levels at $1.74 to $1.80 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 1.89 million shares. If that breakout hits soon, then PRKR will set up to re-test or possibly take out its next major overhead resistance level at its gap-down-day high of $2.35 a share. Any high-volume move above $2.35 will then give PRKR a chance to re-fill some of its previous gap-down-day zone that started near $5 a share.

Traders can look to buy PRKR off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $1.41 a share, or around its 52-week low of $1.21 a share. One can also buy PRKR 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.

King Digital Entertainment

An interactive entertainment player that's starting to trend within range of triggering a near-term breakout trade is King Digital Entertainment (KING), which develops and publishes casual games on digital platforms. This stock hasn't done much so far in 2014, with shares down by around 8%.

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If you take a look at the chart for King Digital Entertainment, you'll notice that this stock is starting to spike higher today right off its 50-day moving average of $17.04 a share with decent upside volume. Volume so far has registered over 950,000 shares, which isn't too far off its three-month average volume of 1.38 million shares. This bounce is quickly pushing shares of KING within range of triggering a near-term breakout trade above a key downtrend line.

Traders should now look for long-biased trades in KING if it manages to break out above some near-term overhead resistance levels at $17.85 to $181.9 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 volume of 1.38 million shares. If that breakout gets started soon, then KING will set up to re-test or possibly take out its next major overhead resistance levels at $19.50 to $20.50, or even its al-time high of $21.39 a share.

Traders can look to buy KING off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $16.76 to $16.60 a share. One could also buy KING 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.

Dick's Sporting Goods

Another stock that's starting to move within range of triggering a big breakout trade is Dick's Sporting Goods (DKS), which operates as a sports and fitness retailer. This stock has been under some selling pressure so far in 2014, with shares off notably by 21%.

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If you take a glance at the chart for Dick's Sporting Goods, you'll notice that this stock gapped down sharply in May from around $53 to below $44 a share with heavy downside volume. Since that move, shares of DKS have stabilized and started to trend sideways, with shares moving between $44 and right around $46 a share. This stock is now starting to spike higher off that $44 level and it's quickly moving within range of triggering a big breakout trade above the upper-end of its recent range.

Traders should now look for long-biased trades in DKS if it manages to break out above its gap-down-day high from May at $46.17 a share with high volume. Watch for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.92 million shares. If that breakout kicks off soon, then DKS will set up to re-fill some of its previous gap-down-day zone from May that started near $53 a share.

Traders can look to buy DKS off weakness to anticipate that breakout and simply use a stop that sits just below $44 a share, or down near $43 to $42.21 a share. One can also buy DKS off strength once it starts to move above those breakout levels share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Zynga

Another stock that's starting to trend within range of triggering a big breakout trade is Zynga (ZNGA), which develops, markets and operates online social games as live services played on the Internet, social networking sites, and mobile platforms in the U.S. and internationally. This stock has been hit hard by the bears over the last three months, with shares off by 26%.

If you take a glance at the chart for Zynga, you'll notice that this stock has been downtrending badly for the last four months, with shares moving lower from its high of $5.87 to its recent low of $2.73 a share. During that downtrend, shares of ZNGA have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ZNGA have started to stabilize a bit and consolidate over the last month, with the stock moving between $3 and $3.25 a share. Shares of ZNGA are now starting to spike higher off $3 and it's quickly moving within range of triggering a big breakout trade.

Traders should now look for long-biased trades in ZNGA if it manages to break out above some near-term overhead resistance levels at $3.25 to $3.51 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 30.66 million shares. If that breakout materializes soon, then ZNGA will set up to re-test or possibly take out its next major overhead resistance levels at $4 to $4.13, or even $4.66 to $5 a share.

Traders can look to buy ZNGA off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3 share. One can also buy ZNGA off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

LiveDeal


My final breakout trading prospect is Internet information provider LiveDeal (LIVE), which provides customer acquisition and online listing services for small and medium-sized local businesses in the U.S. This stock has been on fire so far in 2014, with shares up sharply by 237%.

If you look at the chart for LiveDeal, you'll see that this stock recently gapped up sharply from $2.27 to $5.34 a share with monster upside volume. Following that move, shares of LIVE pulled back to right around its 200-day moving average. Shares of LIVE have now resumed its uptrend, with the stock moving higher from that $3.45 low to its recent high of $4.94 a share. Shares of LIVE are now starting to bounce right off its 50-day moving average of $4.08 a share and it's quickly moving within range of triggering a big breakout trade.

Traders should now look for long-biased trades in LIVE if it manages to break out above some near-term overhead resistance at $4.94 to $5.34 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 1.71 million shares. If that breakout gets underway soon, then LIVE will set up to re-test or possibly take out its next major overhead resistance levels at $6.24 to $7, or even $8 a share.

Traders can look to buy LIVE off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $4.08 or around its 200-day moving average at $3.77 a share. One can also buy LIVE 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.