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TheStreet Open House

5 Biotech Stocks Poised for Breakouts

Sangamo Biosciences

Another stock in the biotechnology and drugs complex that's trading within range of a major breakout trade is Sangamo Biosciences (SGMO), which is engaged in the research, development and commercialization of zinc finger DNA-binding proteins, a naturally occurring class of proteins. This stock is off to an extremely bullish start to 2012, with shares up around 95% so far on the year.

If you take a look at the chart for Sangamo Biosciences, you'll notice that this stock has just started to bounce right off its 50-day moving average of $4.95 a share, after it had pulled back from around $5.88 a share. This bounce is now gearing SGMO up to re-test those recent highs and possible trigger a major breakout trade.

Market players should now look for long-biased traders in SGMO if this stock can manage to trigger a breakout trade above some overhead resistance levels at $5.88 to $5.89 a share, and then above $6.16 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 246,756 shares. If we get that move soon, then SGMO has a strong chance to spike towards $7 to $8 a share.

>>Hot Biotech Stocks Traded by Hedge Funds

One can look to buy SGMO off any weakness to anticipate that breakout and simply use a stop somewhere around its 50-day moving average of $4.95. I would rather buy off strength once SGMO clears $5.88 to $5.89 with volume and then add more above $6.16 a share. If you buy offs strength, then use a stop around $5.30 a share.

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