Stock Quotes in this Article: IDIX, NAT, TTI, NOAH, FET

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.


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.


With that in mind, here's a look at five stocks that are setting up to break out and trade higher from current levels.


Forum Energy Technologies

One name that's just starting to trigger a near-term breakout trade is Forum Energy Technologies (FET), which is a global oilfield products company, serving the subsea, drilling, completion, production and process sectors of the oil and natural gas industry. This stock has been moving modestly higher so far in 2012, with shares up around 9.8%.


If you take a look at the chart for Forum Energy Technologies, you'll see that this stock has been trending sideways for the last month and change, with shares moving between $21.03 on the downside and $23.62 on the upside. This stock has just started to push back above its 50-day moving average of $23.35 and it's now starting to trigger a near-term breakout trade. That trade is setting up as FET pushes above the upper-end of its recent range today with shares now above $23.62.


Traders should now look for long-biased trades in FET once it manages to break out above some near-term overhead resistance at $23.35 to $23.62 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 333,551 shares. That breakout is just starting to get underway, so traders should now look for FET to maintain that move with decent volume flows. If this breakout holds, then FET will set up to re-test or possibly take out its next significant overhead resistance level at $25.78. Keep in mind that $25.78 is the all-time high for FET, so any move above that level should be considered bullish technical price action.


Traders can look to buy FET off any weakness and simply use a stop that sits just below its 50-day moving average of $23.35 a share. I would add to any long positions once FET manages to take out $25.78 a share with high volume.


It's worth mentioning that FET sports a pretty decent short interest. The current short interest as a percentage of the float for FET is rather high at 12.9%. We could easily see short-covering move into this stock if FET manages to take out its all-time high of $25.78 a share in the near future.


Tetra Technologies

Another stock that's closing in on a major breakout trade is Tetra Technologies (TTI), which is an oil and gas player, focused on completion fluids and associated products and services, production testing, wellhead compression, and selected offshore services. This stock has been hit hard by the sellers so far in 2012, with shares down more than 35%.


The chart for Tetra Technologies shows this stock has been downtrending since July, with shares dropping from a high of $7.57 to its recent low of $5.35 a share. During that downtrend, shares of TTI consistently made lower highs and lower lows, which is bearish technical price action. That said, the stock has recently started to see some high-volume spikes higher and it's now moving within range of triggering a near-term breakout trade.


Market players should now look for long-biased trades in TTI once it manages to break out above some near-term overhead resistance levels at $6.10 to $6.22 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 727,048 shares. If that breakout triggers soon, then TTI will set up to re-test or possibly take out its next significant overhead resistance levels at $7 to $7.50 a share. Any high-volume move above $7.57 would then put $9 into focus for TTI.


Traders can look to buy TTI off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $5.55 a share. One could also buy off strength once TTI clears $6.10 to $6.22 with volume and then simply use a stop a few percentage points below its 50-day at $6.10 a share.


Noah

One name that's trending very close to triggering a major breakout trade is Noah (NOAH), a service provider focusing on distributing wealth management products to the high net worth population in the People's Republic of China. This stock is down notably so far in 2012, with shares off by 14%.


The chart for Noah shows this stock has been uptrending very strong for the last month and change, with shares moving from a low of $4.25 to its recent high of $5.29 a share. During that uptrend, shares of NOAH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NOAH within range of triggering a major breakout trade.


Market players should now look for long-biased trades in NOAH once it manages to break out above some past overhead resistance at $5.45, and then once it takes out its 200-day moving average of $5.82 a share with volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 29,578 shares. If that breakout triggers soon, then NOAH will set up to re-test or possibly take out its next significant overhead resistance levels at $7 to $8 a share.


One can look to buy NOAH off any weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $4.78 a share. Traders can also buy off strength once NOAH clears $5.45 to $5.82 a share with high volume and then use a stop just below $5.35 a share.


Idenix Pharmaceuticals

Another stock that's quickly pushing into range of triggering a near-term breakout trade is Idenix Pharmaceuticals IDIX. This company is engaged in the discovery and development of drugs for the treatment of human viral diseases with operations in the U.S. and Europe. This stock has been a favorite target of the bears, with shares down by close to 35% so far in 2012.


The chart for Idenix Pharmaceuticals shows this stock had been downtrending badly from July to early November, with shares plunging from a high of $11.30 to a recent low of $3.35 a share. During that downtrend, shares of IDIX consistently made lower highs and lower lows, which is bearish technical price action. That said, shares of IDIX have just started to come off that $3.35 low and break back above its 50-day moving average of $4.54 a share with heavy upside volume. That move is now pushing IDIX within range of triggering a near-term breakout trade.


Traders should now look for long-biased trades in IDIX once it manages to break out above some near-term overhead resistance at $5.12 a share with high volume. Look for a sustained move or close above $5.12 a share with volume that hits near or above its three-month average action of 2,203,220 shares. If that breakout triggers soon, then IDIX will set up to re-test or possibly take out its next major overhead resistance levels at $6.08 to $6.35 a share. Any high-volume move above $6.35 a share would then give IDIX a chance to re-fill some of its previous gap down zone from August that started near $8.50 a share.


Traders can look to buy IDIX off any weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $4.54 a share. One could also buy off strength once IDIX takes out $5.12 a share with volume and then simply use the same stop just below its 50-day at $4.54 a share.


This stock is a favorite target of short sellers, since its current short interest as a percentage of its float is very high at 12.5%. Shares of IDIX could easily see a large short-squeeze materialize soon, if that breakout triggers with decent volume. Be ready to play that squeeze since it could set up IDIX for a powerful move to the upside.


Nordic American Tankers

My final idea that's trending very close to triggering a near-term breakout trade is Nordic American Tankers NAT, an international tanker company that owns approximately 20 modern double-hull Suezmax tankers, including four new building vessels. This stock has been hammered by the bears in the last six months, with shares off sharply by over 35%.


The chart for Nordic American Tankers shows this stock has been downtrending badly for the last four months, with shares falling from a high of $13.88 to its recent low of $8.20 a share. During that downtrend, shares of NAT consistently made lower highs and lower lows, which is bearish technical price action. That bearish action also pushed NAT into extremely oversold territory, since its relative strength index reading hit below 30. Shares of NAT have now potentially formed a double bottom at $8.28 to $8.20 a share and its quickly moving within range of triggering a near-term breakout trade.


Traders should now look for long-biased trades in NAT once it manages to break out above some near-term overhead resistance level $8.96 to $9.60 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 580,138 shares. If that breakout triggers soon, then NAT will set up to re-test or possibly take out its next major overhead resistance levels at $10.50 to $11.50 a share.


One could look to buy NAT off any weakness to anticipate that breakout and then simply use a stop that sits just below some near-term support at $8.20 a share. Traders can also just buy off strength once NAT takes out $8.96 a share with volume and then simply use the same stop below $8.20 a share. I would look to add to either position once NAT clears its 50-day at $9.60 with volume.


Keep in mind that the current short interest as a percentage of the float for NAT is rather high at 10.6%. This is a decent amount of shorts involved in NAT, so we could easily see a large short-squeeze develop if the stock triggers that breakout soon.


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 the author held no positions in any of the stocks mentioned.