One more under-$10 biotech stock that looks ready to trigger a major breakout trade is Halozyme Therapeutics (HALO), a biopharmaceutical company whose research focuses on human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits. This stock is virtually flat so far in 2012, with shares off by around 1.5%.
If you take a look at the chart for Halozyme Therapeutics, you'll see that this stock gapped down big back in April from around $11 to $7.51 a share with monster volume. Following that sharp move lower, shares of HALO have started to rebound strong and uptrend towards its recent high of $9.83 a share. During that uptrend, shares of HALO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed HALO within range of triggering a major breakout trade.
Traders should now look for long-biased trades in HALO if it can manage to trigger a near-term breakout trade above some overhead resistance levels at its 200-day moving average of $9.39 a share, and above some more resistance at $9.83 a share with high volume. Look for a sustained move or close above those levels with volume that's near or above its three-month average volume of 792,700 shares. If we get that action soon, then HALO could re-fill the rest of that gap and take out $11.50 a share, and then possibly re-test its March high of $13.50 a share.One could be a buyer of HALO off weakness to anticipate that breakout, and simply use a stop just below its 50-day moving average of $8.45 a share. If you buy off weakness, then I would add to the position once $9.39 to $9.83 is taken out with heavy upside volume. One could also buy off strength and get long once those breakout levels are taken out with volume, and simply use a stop just below $9.39 a share. The short-sellers are active in this stock, since the current short interest as a percentage of the float for HALO is very high at 11.8%. If that breakout triggers soon, then a big short-squeeze could develop as HALO moves back into that gap from back in April. To see more hot under-$10 equities, check out the Stocks Under-$10 Setting Up to Explode portfolio on Stockpickr. -- Written by Roberto Pedone in Winderemere, Fla.
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