Stock Quotes in this Article: CORT, CYTX, DECK, VRSN, Z

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.

An example of a recent successful breakout trade is real estate information player Zillow (Z) which I featured in Jan. 4’s “5 Stocks Poised for Breakouts” at $28.67 a share. I mentioned in that piece that shares of Z were uptrending strong, with the stock making higher lows and higher highs over the prior month. I pointed out that the strong uptrend for Z was pushing the stock within range of triggering a major breakout trade if it could take out some near-term overhead resistance levels at $28.94 to $29.10 a share with high volume.

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Guess what happened? Shares of Z went on to trigger that exact breakout and the upside volume flows that accompanied the move were bullish. This stock has never looked back since breaking out, with shares soaring to its recent high of $37.05 a share. That’s a fat gain in a very short timeframe for anyone who took the trade. This stock now has a much tougher path to higher prices, since stiff overhead resistance sits at $38.41 to $39.20 a share. As I write this, Z has started to move back below its 200-day moving average of $35.58 a share, so the stock might be due for a decent pullback after that massive run.

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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Durect

One stock that looks poised to trigger a major breakout trade is Durect (DRRX), which is focused on the development of pharmaceutical products based on its proprietary drug-delivery technology platforms. This stock has been hit hard by the bears during the last three months, with shares off by 21%.

This company has a major catalyst on the horizon, since it is preparing to submit a new drug application in the first quarter of 2013 for Posidur, a post-operative anesthetic that utilizes its patented Saber technology.

If you take a look at the chart for Durect, you’ll notice that this stock has just started to trade back above both its 50-day moving average at 96 cents and it 200-day moving average at $1.01 a share with strong upside volume flows. Volume over the last three trading sessions (all up days) has registered either very close to or well above its three-month average volume of 468,602 shares. That action has now pushed shares of DRRX within range of triggering a major breakout trade.

Traders should now look for long-biased trades in DRRX if it manages to break out above some near-term overhead resistance at $1.15 a share with high volume. Look for a sustained move or close above $1.15 a share with volume that hits near or above its three-month average action of 468,602 shares. If that breakout hits soon, then DRRX will set up to re-test or possibly take out its next major overhead resistance levels at $1.42 to $1.71 a share.

Traders can look to buy DRRX off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of 96 cents per share or near some key support at 92 cents per share. One could also buy DRRX off strength once it takes out $1.15 a share with volume and then simply use a stop that sits close to its 200-day moving average of $1.01 a share.

Corcept Therapeutics

Another pharmaceutical stock that’s quickly moving within range of triggering a near-term breakout trade is Corcept Therapeutics (CORT), which is engaged in the discovery and development of drugs for the treatment of severe metabolic and psychiatric disorders. This stock has been hammered by the bears during the last six months, with shares off a large 46%.

If you take a look at the chart for Corcept Therapeutics, you’ll notice that this stock has been uptrending strong for the last three months, with shares soaring from its low of $1.27 to its recent high of $2.20 a share. During that uptrend, shares of CORT have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed CORT within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in CORT if it manages to break out above some near-term overhead resistance at $2.20 a share with high volume. Look for a sustained move or close above $2.20 a share with volume that registers near or above its three-month average action of 622,545 shares. If that breakout hits soon, then CORT will set up to re-test or possibly take out its next major overhead resistance levels at $2.50 to $2.75 a share. Any move above $2.75 will then put $2.89 to $3.03 into range for shares of CORT.

Traders can look to buy CORT off any weakness to anticipate that breakout and simply use a stop that sits close to some key near-term support at $1.80 a share. One could also buy off strength once CORT clears $2.20 a share with volume and then simply use a stop that sits just below $2 a share.

Deckers Outdoor

Another stock that’s trading within range of triggering a near-term breakout trade is Deckers Outdoor (DECK), a designer, producer, marketer and brand manager of innovative, high-quality footwear and accessories. This stock has been in a decent uptrend for the last three months, with shares up 14%.

If you look at the chart for Deckers Outdoor, you’ll see that this stock has been finding buyers over the last month and change any time it’s traded down towards its 50-day moving average. Shares of DECK are now bouncing strongly off its 50-day of $37.23 a share and its quickly moving within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in DECK if it manages to break out above some near-term overhead resistance levels at $41 to $41.93 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 2.5 million shares. If that breakout triggers soon, then DECK will set up to re-test or possibly take out its next major overhead resistance levels at $44.16 to its 200-day moving average at $44.36 a share. Any high-volume move back above $44.36 will then put $46 to $49.61 into range for shares of DECK.

Traders can look to buy DECK off any weakness to anticipate that breakout and simply use a stop that sits close to its 50-day moving average of $37.23 a share. One can also buy off strength once DECK clears those breakout levels with volume and then use a stop that sits just below $40 to $39 a share.

This stock is a favorite target of the bears, since its current short interest as a percentage of its float is a whopping 44.8%. If DECK triggers that breakout soon, then this stock could explode higher due to its high short interest.

VeriSign

Another stock that looks poised to trigger a breakout trade here is VeriSign (VRSN), a provider of Internet infrastructure services for the networked world. This stock is down notably over the last three months, with shares off by 9.9%.

This company just reported earnings where it met Wall Street expectations on revenues and beat expectations on earnings per share. This news could provide a catalyst that sends shares of VRSN significantly higher from current levels. Volume today has already hit 4.1 million shares, which is just below its three-month average action of 5.3 million shares, and the stock up 4.9% to $41.96.

If you look at the chart for VeriSign, you’ll notice that this stock has been uptrending strong for the last two months, with shares soaring from its low of $32.81 to its intraday high of 42.95 a share. During that uptrend, shares of VRSN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of VRSN within range of triggering a major breakout trade.

Traders should now look for long-biased trades in VRSN if it manages to break out above some near-term overhead resistance at $43.55 a share with high volume. Look for a sustained move or close above $43.55 a share with volume that registers near or above its three-month average action of 5.3 million shares. If that breakout triggers soon, then VRSN will set up to re-fill some of its previous gap down zone from last October that started near $47 a share.

Traders can look to buy VRSN off any weakness to anticipate that breakout and then simply use a stop that sits right below today’s low of $40.63 a share. One can also buy VRSN off strength once it takes out $43.55 a share with volume and then simply use a stop that sits just below its 200-day moving average of $42.63 a share.

Cytori Therapeutics

My final idea today for a near-term breakout trade is Cytori Therapeutics (CYTX), which is engaged in developing cell therapies to treat cardiovascular disease and repair soft tissue defects. This stock has been slammed by the sellers during the last six months, with shares off by 29%.

If you look at the chart for Cytori Therapeutics, you’ll notice that this stock has just started to uptrend a bit after gapping down sharply last December from $3.60 to below $2.80 a share. During that uptrend over the last month, shares of CYTX have trended higher from its recent low of $2.46 to its high of $3.16 a share. That move has started to push shares of CYTX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in CYTX if it manages to break out above some near-term overhead resistance levels at $2.85 to $3.04 a share and then once it clears more resistance at $3.16 to $3.20 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 437,312 shares. If that breakout hits soon, then CYTX will set up to re-fill that previous gap down zone that started close to $3.60 a share. If that gap gets filled, then CYTX will have a chance to tag its next significant overhead resistance levels at $4 to $4.25 a share.

Traders can look to buy CYTX off any weakness to anticipate that breakout and then simply use a stop that sits just below some key near-term support at $2.65 a share. One could also buy CYTX off strength once it takes out those breakout levels with volume and then simply use the same stop near $2.65 a share.

This is another favorite target of the short-sellers, since the current short interest as a percentage of the float for CYTX is a large 17.2%. If that breakout triggers soon, then CYTX could easily get squeezed significantly higher as the bears rush to cover some of their bearish bets.

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.