Stock Quotes in this Article: BIDU, BTH, HVT, VELT, BCOV

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 who can ultimately push it significantly higher.

An example of a recent successful breakout trade is biotechnology and drugs player Aegerion Pharmaceuticals (AEGR), which I featured in Nov. 29’s “5 Stocks About to Burst.” I mentioned in that piece that shares of AEGR were trending sideways between $18.33 on the downside and $23 a share on the upside. At that time, the stock was just starting to bounce of $22 a share with decent upside volume. That move was quickly pushing AEGR within range of triggering a major breakout trade above the upper-end of its recent range at $23 a share.

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Guess what happened? Shares of AEGR hit $22.98 a share a few days later and then pulled right back to its 50-day moving average where buyers came in and supported the stock. A few weeks later, AEGR triggered that breakout above $23 a share with decent upside volume. The stock has now hit a new 52-week high of $28.23 a share today, which is a solid gain for anyone who played the breakout. Shares of AEGR are now in clear uptrend and the stock still looks like it wants to trend significant higher.

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.

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Brightcove

One name that’s trending very close to triggering a near-term breakout trade is Brightcove (BCOV), which is a global provider of cloud-based solutions for publishing and distributing professional digital media. This stock has been trashed by the sellers during the last six months, with shares off by 32%.

 

If you take a look at the chart for Brightcove, you’ll notice that this stock has been downtrending badly for the last six months, with shares plunging from $15.25 a share to its recent low of $8.26 a share. During that downtrend, shares of BCOV have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of BCOV have started to bounce off that $8.26 low and move within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in BCOV if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $9.75 a share and above some more overhead resistance levels at $9.93 to $10.19 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 364,070 shares. If that breakout hits soon, then BCOV will set up to re-test or possibly take out its next major overhead resistance levels at $11.50 to $12.50 a share. Any high-volume move above those levels will then put $13.30 to $13.55 into focus for shares of BCOV.

Traders can look to buy BCOV off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $9 to $8.86 a share. One could also buy BCOV off strength once it takes out those breakout levels with volume and then simply use a stop that sits just below its 50-day moving average of $9.75 a share.

Baidu

Another stock that’s quickly moving within range of triggering a major breakout trade is Baidu (BIDU), which is a Chinese language Internet search provider. This company serves three types of online participants, which include users, customers and Baidu union members. This stock has started off 2013 with a hot start, since shares are up 13.6%.

If you take a look at the chart for Baidu, you’ll notice that this stock has been uptrending strongly for the last month, with shares moving higher from its low of $85.96 to its recent high of $114.14. During that uptrend, shares of BIDU have been consistently making higher lows and higher highs, which is bullish technical price action. That move has pushed BIDU within range of taking out its 200-day moving average of $115.92 a share, and it’s within range of triggering a major breakout trade just above that level.

Market players should now look for long-biased trades in BIDU if it manages to break out above its 200-day at $115.92 a share and then once it clears more overhead resistance levels at $116.27 to $117.20 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 4.9 million shares. If that breakout triggers soon, then BIDU will set up to retest or possibly take out its next major overhead resistance levels at $125 to $130 a share. Any high-volume move above those levels will then put $134.71 into focus for shares of BIDU.

Traders can look to buy BIDU off any weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support at $110 to $109.65 a share. One could also buy off strength once BIDU clears those breakout levels with volume and then simply use a stop that sits just below its 200-day moving average of $115.92 a share.

Velti

Another stock that’s trending very close to triggering a near-term breakout trade is Velti (VELT), which is a global provider of mobile marketing and advertising technology and solutions. This stock has been hammered by the bears during the last three months, with shares down by 34.6%.

If you look at the chart for Velti, you’ll notice that this stock has been uptrending strongly for the last month and change, with shares soaring higher from its low of $3.07 to its recent high of $5.99 a share. During that uptrend, shares of VELT have been mostly making higher lows and higher highs, which is bullish technical price action. This stock has just started to bounce right off its 50-day moving average of $4.85 a share and it’s quickly moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in VELT if it manages to break out above some near-term overhead resistance levels $5.38 to $5.99 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 1.8 million shares. If that breakout triggers soon, then VELT will set up to re-test or possibly take out its next major overhead resistance levels at $6.50 to its 200-day moving average of $7.37 a share. Any high-volume move above those levels will then put $8 to $9 a share into range for VELT.

Traders can look to buy VELT off any weakness to anticipate that breakout and simply use a stop that sits close to some key near-term support at $4.70 to $4.46 share. One can also buy off strength once VELT clears those breakout levels with volume and then use a stop that sits just below its 50-day moving average of $4.85 a share.

Haverty Furniture

Another stock that’s trending very close to triggering a major breakout trade is Haverty Furniture (HVT), which is a retailer of residential furniture and accessories. It provides its customers with a selection of products and styles mainly in the middle to upper-middle price ranges. This stock has been on fire during the last six months, with shares up a whopping 43%.

If you look at the chart for Haverty Furniture Companies, you’ll notice that this stock has been in a monster uptrend for the last six months, with shares soaring higher from its low of $10.07 to its recent high of $17.55 a share. During that uptrend, shares of HVT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed HVT within range of triggering a major breakout trade.

Traders should now look for long-biased trades in HVT if it manages to break out above some near-term overhead resistance levels at $17.20 to $17.55 a share and then once it takes out more overhead resistance at $17.62 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 115,474 shares. If that breakout hits soon, then HVT will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $20 to $23 a share.

Traders can look to buy HVT off any weakness to anticipate that breakout and then simply use a stop that sits right around some key near-term support levels at $16.16 a share to its 50-day at $15.82 a share. One can also buy off strength once HVT takes out those breakout levels with volume and then simply use a stop that sits right around $16.50 to $16.16 a share.

Blyth

My final idea that’s trending very close to triggering a near-term breakout trade is Blyth (BTH), which designs and markets home fragrance products and decorative accessories, as well as weight management products, nutritional supplements and energy drinks. This stock has been crushed by the sellers during the last six months, with shares down by 47%.

If you look at the chart for Blyth, you’ll notice that this stock has been uptrending modestly for the last month, with shares moving higher from its recent low of $14.01 a share to its intraday high of $18.75 a share. During that uptrend, shares of BTH have been consistently making higher lows and higher highs, which is bullish technical price action. This stock has also just started to trend back above its 50-day moving average of $16.76 a share and it’s starting to clear some near-term overhead resistance at 417.48 a share. That move is quickly pushing BTH within range of triggering another near-term breakout trade.

Traders should now look for long-biased trades in BTH if it manages to break out above some near-term overhead resistance levels at $17.48 to $19.69 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 483,161 shares. If that breakout hits soon, then BTH will set up to re-test or possibly take out its next major overhead resistance levels at $23 to $24 a share. Any high-volume move above those levels will then put $27 to $28.67 a share into focus for shares of BTH.

Traders can look to buy BTH off any weakness to anticipate that breakout and then simply use a stop that sits just below its 50-day moving average of $16.76 a share or around some key near-term support at $15.19 a share. One could also buy BTH off strength once it takes out those breakout levels with volume and then simply use a stop just below $19 a share or just below the 50-day if buy once it clears $17.48 a share first.

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.