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5 Biotech Stocks Poised for Breakouts

Dyax

One more stock that's setting up to trigger a major breakout trade is biotechnology and drugs player Dyax (DYAX), which focuses on identifying, developing and commercializing treatments for conditions identified as plasma kallikrein (bradykinin) mediated angioedema, including hereditary angioedema, ACE inhibitor-induced angioedema and angioedema. This stock is off to a blazing hot start in 2012, with shares up a whopping 100%.

If you look at the chart for DYAX, you'll see that this stock has been uptrending strong for the past six months, with shares soaring from a low of $1.33 to a recent high of $2.88 a share. During that monster uptrend, shares of DYAX have been consistently making higher lows and higher highs, which is bullish technical price action. That move is now quickly pushing DYAX within range of triggering a major breakout trade.

Market players should now look for long-biased traders in DYAX if it can manage to clear some key breakout levels of $2.88 to $2.90 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 535,998 shares. If we get that move soon, then DYAX could trend higher towards its next significant overhead resistance levels at $3.50 $4.14 a share.

One could look to buy DYAX off weakness and simply use a stop below some key near-term support at $2.50 a share. I would rather buy off strength once DYAX takes out $2.88 to $2.90 a share with heavy volume. If you buy off strength, you can actually use that same stop just below $2.50 a share.

Keep in mind that DYAX has a major catalyst on the horizon, since the company will meet with the FDA on September 5 for interim Phase II data on its drug Ecallantide, which is used for the treatment of ACE-induced angioedema, a life threatening inflammatory response brought on by adverse reaction to angiotensin-converting enzyme inhibitors. If this stock triggers that breakout soon, then it will likely spike higher right into that event.

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

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

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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