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5 Stocks Setting Up to Break Out

Adventrx Pharmaceuticals

One stock that could be setting up for a big breakout is Adventrx Pharmaceuticals (ANX), a specialty pharmaceutical company focused on acquiring, developing and commercializing product candidates. This stock is down big so far in 2011, with shares off by over 55%, but the stock is ripping higher today by more than 14%.

The move higher in the stock today is due to Vista Partners' starting coverage on the stock with a $7.50 price target. A Vista analyst said that the stock currently trades at a negative enterprise value since its market cap is less than the cash position on its balance sheet.

If you take a look at the chart for Adventrx, you'll see that this stock recently gapped down big in mid-August from $2.75 a share to under $1 a share. Following that gap down, the stock has now started to trade into a sideways basing pattern between 80 cents and $1.20 a share. That massive gap down in price has also created an oversold condition on the stock as measured by its relative strength index reading of 36. Oversold can always get more oversold, but if this stock does manage to break out soon, then it could bounce big off these depressed levels.

Traders should now watch for a breakout if ANX moves above $1.21 a share on solid volume. Look for volume that's trading in close to or above its three-month average action of 1.5 million shares. Volume today is strong with over 2.8 million shares traded and the stock up over 15% to $1.06 a share.

You could be a buyer of this stock once it clears $1.21 with volume, or you could buy it off any weakness as long as the recent higher lows pattern holds. If you see ANX take out $1.21 with volume, then I think this stock will move big and start to fill some of that massive gap down in price. You could see a run toward $2 a share or possible even higher.

Adventrx shows up on a list of Hot Biotech Trades for Second-Half 2011.
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