5 Stocks Poised for Breakouts

Sunesis Pharmaceuticals

One biotechnology and drugs stock that's trading very close to triggering a major breakout trade is Sunesis Pharmaceuticals (SNSS), which is focused on the development and commercialization of oncology therapeutics for the treatment of solid and hematologic cancers. This stock is off to a hot start in 2012, with shares up a whopping 180% so far. I also featured Sunesis recently in "5 Biotech Stocks Under $10 Blasting Higher."

This company has a catalyst on the horizon; the phase III single interim analysis for its Valor leukemia treatment will be conducted sometime in September. The company has already enrolled 391 patients of the 450 planned for this safety and data study.

If you take a look at the chart for Sunesis Pharmaceuticals, you'll notice that this stock has been uptrending very strong for the last six months, with shares making mostly higher lows and higher highs, which is bullish technical price action. This stock just found buyers right off its 50-day moving average of $2.98 a share, and it's now quickly moving within range of triggering a major breakout trade. The upside volume for SNSS has also been increasing dramatically as it approaches this potential breakout play.

>>22 Biopharma Stocks With Breakout Potential in 2012

Traders should now look for long-biased traders in SNSS once it manages to break out above some near-term overhead resistance levels at $3.27 to $3.38 a share and then above $3.57 to $3.69 a share with high volume. Look for a sustained move or close above all of those levels with volume that hits near or above its three-month average action of 289,147 shares. If that breakout triggers soon, then SNSS should easily head north of $4 a share and possibly tag $5 a share before that catalyst in September.

One could look to buy SNSS off any weakness to anticipate the breakout and simply use a stop that sits just below its 50-day moving average of $2.98 a share. One could also just buy off strength once SNSS clears $3.27 to $3.38 a share with decent volume and then add above the next tier of resistance levels. I would use a stop at around $3.10 if you buy off strength once SNSS clears $3.27 with volume.

Keep in mind that SNSS is a favorite target of the short-sellers. The current short interest as a percentage of the float for SNSS is very high at 11.6%. If that breakout triggers soon, then look for the shorts to help fuel the run higher as the rush to cover some of their bearish bets.

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