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TheStreet Open House

5 Biotech Stocks Poised for Breakouts

Stocks in this article: VPHM SGMO TSPT GERN DYAX

Viropharma

One biotechnology and drugs player that's trading within range of triggering a near-term breakout trade is Viropharma (VPHM - Get Report), which is engaged in the development and commercialization of products that address diseases, with a focus on products used by physician specialists or in hospital settings. This stock is off to a slow start so far in 2012, with shares down by over 14%.

If you take a look at the chart for Viropharma, you'll notice that this stock gapped down huge back in April from $31 to $20 a share on monster volume. Follow that sharp move lower, shares of VPHM formed a double-bottom chart pattern at around $19.12 to $19.02 a share, and then went on to spike higher toward its current price of $23.30 a share. That spike has now pushed VPHM within range of triggering a near-term breakout trade.

Traders should now look for long-biased traders in VPHM once it manages to trigger a breakout trade above some near-term overhead resistance at $23.43 to $23.89 a share, and then above its 200-day moving average of $24.76 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 action of 1.1 million shares.

>>22 Biopharma Stocks With Breakout Potential in 2012

If we get that action soon, then VPHM will have a great chance to re-fill some of that gap from back in April. We could easily see VPHM spike toward $27 to $28 a share in the near future.

One could look to buy VPHM off any weakness to anticipate the breakout and simply use a stop near its 50-day moving average of $21.76 a share. I would rather buy this off strength though and get long once it clears those breakout levels with high volume. Use a stop just below $23.43 if you get long off strength.

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