Another stock that's trading within range of a major breakout trade is biotechnology and drugs player
(INFI - Get Report)
, which engages in the discovery and development of medicines for difficult-to-treat diseases. This stock is off to a strong start in 2012, with shares up over 40%.
If you take a look at the chart for Infinity Pharmaceuticals, you'll notice that this stock has been on a tear for the last four months after it broke out above $6.95 and then $10.18 a share. That first breakout over $6.95 came with huge volume and triggered a gap-fill in this stock back to $10.18 a share. Then the breakout over $10.18 came again with big volume and pushed the stock to a recent high of $13.75 a share. Since hitting that high, shares of Infinity Pharmaceuticals have pulled back below its 50-day
to a recent low of $11.76 a share. That said, on Thursday the stock recaptured its 50-dy and now looks poised to trend higher and trigger another breakout trade.
>>22 Biopharma Stocks With Breakout Potential
Market players should now look for long-biased traders in INFI if it can manage to trigger a near-term breakout trade above some overhead resistance at $13.00 to $13.75 a share with high-volume. Look for a sustained move or close above that level on volume that registers close to or above its three-month average action of 216,341 shares. If we get that action soon, then INFI should trade up towards $15 to $20 a share in the near future.
If you buy this stock off of weakness and anticipate that breakout, then I would simply use a stop just below its 50-day moving average of $12.44 a share. You can also play this off of strength and get long once it takes out $13 to $13.75 a share with strong volume, and simply use a stop just below $13 a share.
Keep in mind that this stock is heavily shorted since 17.6% of its 16.20 million share float is sold short by the bears. The bears have also been increasing their bets from the last reporting period by 12.4%, or by about 229,500 shares. If INFI can trigger that breakout trade soon, then we could easily see a sizable short-squeeze develop once the stock hits a new
above $13.75 a share.