Pacific Biosciences of California
Another under-$10 name in the biotechnology and drugs complex that looks for a sharp move higher is Pacific Biosciences of California (PACB - Get Report), which develops, manufactures and markets an integrated platform for genetic analysis. The company has developed a technology to study the synthesis and regulation of DNA. This stock is off to a weak start in 2012, with shares off by around 20%.
If you take a look at the chart for Pacific Biosciences, you'll notice that this stock has been stuck in a nasty downtrend for the last six months, with shares plunging from over $5 to a recent low of $1.76 a share. During that massive move lower, shares of PACB have been consistently making lower highs and lower lows, which is bearish technical price action. That said, I believe this stock has started to put in a bottoming process since buyers have stepped in over the last two months at $1.76 to $1.88 a share. Also, PACB has started to challenge its 50-day moving average of $2.12 a share, which is bullish action.
This company is set to report earnings today after the market close. As long as we don't get a Zynga (ZNGA)-style report, then this stock could be finally done going lower. I would advise traders to wait until after PACB reports and then look to trade the potential breakout.>>22 Biopharma Stocks With Breakout Potential in 2012 Traders should now look for long-biased trades in PACB if it can manage to trigger a break out above some near-term overhead resistance at $2.19 to $2.35 a share with high volume. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 401,394 shares. If that breakout triggers after earnings, then PACB has an excellent chance of re-testing and possibly taking out its next major overhead resistance levels at $2.87 to its 200-day moving average of $3.08 a share. If you like the setup here for PACB, then look to buy this stock off weakness and simply use a stop just below some near-term support at $1.88 a share. I would rather get long PACB off strength once it starts to sustain a trend above its 50-day at $2.12 a share with strong upside volume flows. I would simply use a stop that's a few percentage points below its 50-day if you buy off strength. Remember, look to play this after earnings, not before.