5 Stocks Setting Up to Break Out

Ventrus Biosciences

One final stock that's trending very close to triggering a near-term breakout trade is Ventrus Biosciences (VTUS). This is a specialty pharmaceutical company focused on the development and commercialization of late-stage prescription drugs for gastrointestinal disorders, specifically hemorrhoids, anal fissures and fecal incontinence. This stock is off to a solid start in 2012 with shares up over 30%.

If you look at the chart for Ventrus Biosciences, you'll see that this stock has been downtrending for the last month, with shares dropping from a high of $13.53 to a recent low of $9.54 a share. During that sharp move lower, shares of Ventrus have been making lower highs and lower lows, which is bearish technical price action. That said, the stock has held above its 200-day moving average of $9.21 a share, and its bouncing strong today right off its 50-day moving average of $10.07 a share with decent volume. The bounce today is quickly pushing VTUS within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in VTUS if it can manage to trigger a near-term break out above $11.03 to $11.10 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 177,975 shares. If we get that breakout soon, then look for VTUS to re-test its May high of $13.53 and possibly take that level out to the upside.

You can buy VTUS off of weakness as long as it does not violate its recent low of $9.54 a share. I would simply use a stop just below $9.54. It's probably a better idea to buy off strength once it takes out $11.03 to $11.10 with high volume, and simply use a stop a few percentage points below those levels.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

RELATED LINKS:

>>5 Breakout Stocks to Buy on This Bounce 


>>5 Under-$10 Headed for Higher Ground


>>5 Stocks With Unusual Insider Buying

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.

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