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TheStreet Open House

5 Stocks Setting Up to Break Out

Elan

One stock in the biotechnology and drugs complex that's just starting to trigger a breakout trade today is Elan (ELN), a neuroscience-based biotechnology company. Elan is focused on discovering and developing advanced therapies in neurodegenerative and autoimmune diseases. This stock hasn't done much in 2012, with shares up just 7.5%.

A Jefferies analyst today light a fire under this stock after they said the stock should start moving ahead of bapi data. Those comments have pushed shares of Elan into new 52-week-high territory.

If you look at the chart for Elan, you'll see that this stock has been trading range bound for the past few months, between $14.40 on the upside and around $12 on the downside. Now just today shares of ELN are starting to break out above that near-term overhead resistance at $14.40 with monster volume.

>>6 Hot Stocks on Traders' Radars

At last check, volume today is already over 5.1 million shares which is well above its three-month average action of 3.36 million shares. Volume on Thursday (also up day) was also huge with 6.73 million shares traded.

Traders should now watch ELN for a sustained high-volume move and close above $14.40 a share to signal that this stock wants to trend significantly higher. I would also look for ELN to close near its daily highs today as a sign of strength. If we get that action today or soon, then look for ELN to make a run at $20 a share or possibly much higher.

Traders should now look for long biased trades in ELN as long as the stock is trending above that key breakout level of $14.40 a share. I would simply use a mental stop that's a few percentage points below $14.40 if you get long into this strength, in case this breakout fails.

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