Stock Quotes in this Article: ANR, HIMX, THLD, UA, XOMA, TWOU

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. 



One example of a successful breakout trade I flagged recently was application software player 2U (TWOU), which I featured in July 28's "5 Stocks Ready for Breakouts" at around $14.37 per share. I mentioned in that piece that shares of 2U recently formed a major bottoming chart pattern at around $13 a share. Shares of TWOU were starting to spike higher off that support level and it was beginning to move within range of triggering a near-term breakout trade above some key overhead resistance levels at $14.43 to $14.78 a share.

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Guess what happened? Shares 2U triggered that breakout on August 7th with strong upside volume flows. Volume on that day registered 703,000 shares, which is well above its three-month average volume of 193,452 shares. Shares of TWOU tagged an intraday high on August 8th of $17.17 a share, which represents a solid gain of right around 20%. Shares of TWOU now look ready to trend significantly higher, if this stock can manage to take out its all-time high at $17.58 a share with high volume.

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.

Xoma



One biotechnology player that's starting to trend within range of triggering a near-term breakout trade is Xoma (XOMA), which discovers and develops antibody-based therapeutics in the U.S., Europe and the Asia Pacific This stock has been moving higher over the last three months, with shares up just over 10%.

If you take a look at the chart for XOMA, you'll notice that this stock recently formed a double bottom chart pattern at $3.66 to $3.70 a share. Following that bottom, shares of XOMA are now starting to uptick a bit and move within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in XOMA if it manages to break out above some near-term overhead resistance levels at $4.09 to $4.21 a share and then once it takes out its 50-day moving average of $4.31 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 1.47 million shares. If that breakout begins soon, then XOMA will set up to re-test or possibly take out its next major overhead resistance levels at $4.95 to $5 a share, or even its 200-day moving average of $5.38 a share.

Traders can look to buy XOMA off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $3.70 to $3.66 a share. One can also buy XOMA 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.

Read More: 5 Breakout Stocks Under $10 Set to Soar

Himax Technologies



A semiconductor player that's quickly moving within range of triggering a major breakout trade is Himax Technologies (HIMX), which provides display imaging processing technologies to consumer electronics worldwide. This stock has been hammered by the bears so far in 2014, with shares off sharply by 49%.

If you take a look at the chart for Himax Technologies, you'll notice that this stock recently broke out above some near-term overhead resistance levels at $6.80 to $6.89 a share with heavy upside volume flows. Following that breakout, shares of HIMX have continued to push higher and this stock is now quickly approaching another major breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in HIMX if it manages to break out above Friday's intraday high of $7.40 a share to some more key overhead resistance at $7.71 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 5.58 million shares. If that breakout triggers soon, then HIMX will set up to re-test or possibly take out its next major overhead resistance levels at $8.77 to $9.05 a share, or even its 200-day moving average of $9.80 a share.

Traders can look to buy HIMX off weakness to anticipate that breakout and simply use a stop that sits right below Friday's intraday low of $6.92 a share or around more near-term support at $6.40 a share. One could also buy HIMX 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.

Read More: 4 Stocks Spiking on Big Volume

Threshold Pharmaceuticals



Another biotechnology player that's starting to trend within range of triggering a big breakout trade is Threshold Pharmaceuticals (THLD), which discovers and develops therapeutic agents that target tumor cells for the treatment of patients living with cancer in the U.S. This stock hasn't done much so far in 2014, with shares trading off by 8.7%.

If you take a glance at the chart for Threshold Pharmaceuticals, you'll notice that this stock has been consolidating and trending sideways for the last month or so, with shares moving between $3.84 on the downside and $4.36 on the upside. Shares of THLD have now started to bounce higher right off its 50-day moving average of $4.10 a share and it's now quickly moving 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 THLD if it manages to break out above some near-term overhead resistance levels at $4.38 to $4.44 a share with high volume. Watch for a sustained move or close above those levels with volume that hits near or above its three-month average action 374,691 shares. If that breakout develops soon, then THLD will set up to re-test or possibly take out its next major overhead resistance levels at $4.67 to $4.88, or even $5.20 a share. Any high-volume move above $5.20 will then give THLD a chance to tag its next major overhead resistance levels at $5.58 to $5.93 a share.

Traders can look to buy THLD off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $3.95 to $3.84 a share. One can also buy THLD 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.

Read More: 3 Big Stocks on Traders' Radars

Alpha Natural Resources



Another basic materials player that's starting to trend within range of triggering a big breakout trade is Alpha Natural Resources (ANR), which is engaged in extracting, processing, and marketing thermal and metallurgical coal in Virginia, West Virginia, Kentucky, Pennsylvania and Wyoming. This stock has been under selling pressure over the last six months, with shares moving sharply lower by 26%.

If you take a glance at the chart for Alpha Natural Resources, you'll notice that this stock has been uptrending over the last few weeks, with shares moving higher from its low of $3.14 to its intraday high of $3.78 a share. During that uptrend, shares of ANR have been making mostly higher lows and higher highs, which is bullish technical price action. Shares of ANR have also recently triggered a breakout above some near-term overhead resistance at $3.62 a share. This stock is now quickly moving within range of triggering another big breakout trade.

Traders should now look for long-biased trades in ANR if it manages to break out above some near-term overhead resistance levels at $3.82 to $3.94 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 7.83 million shares. If that breakout materializes soon, then ANR will set up to re-test or possibly take out its next major overhead resistance levels at $4.60 to $4.73 a share, or even $5.08 a share.

Traders can look to buy ANR off weakness to anticipate that breakout and simply use a stop that sits near its 50-day moving average of $3.47 a share or right around some more near-term support at $3.30 a share. One can also buy ANR 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.

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Under Armour


My final breakout trading prospect is apparel player Under Armour (UA), which develops, markets, and distributes branded performance apparel, footwear, and accessories for men, women, and youth primarily in North America, Europe, the Middle East, Africa, Asia, and Latin America.  This stock is off to a very strong start in 2014, with shares up sharply by 56%.

If you look at the chart for Under Armour, you'll notice that this stock recently gapped up sharply from $60 to over $70 with strong upside volume flows. Following that sharp move to the upside, shares of UA have been consolidating and trending sideways over the last few weeks, with shares moving between $66.28 on the downside and $70.94 on the upside. Shares of UA are now starting to trend a bit higher and move within range of triggering a big breakout trade above the upper-end of its recent sideways trading pattern.

Traders should now look for long-biased trades in UA if it manages to break out above some key near-term overhead resistance levels at $70 to its 52-week high at $70.94 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 2.63 million shares. If that breakout materializes soon, then UA will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $80 to $90 a share.

Traders can look to buy UA off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $66.28 a share. One can also buy UA 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.