5 Biotech Stocks Poised for Breakouts

Synergy Pharmaceuticals

Another stock in the biotechnology and drugs complex that's setting up for a major breakout trade is Synergy Pharmaceuticals (SGYP), which focuses primarily on the development of drugs to treat gastrointestinal disorders and diseases in the U.S. This stock is off to a decent start in 2012, with shares up over 30% so far.

If you take a look at the chart for Synergy Pharmaceuticals, you'll notice that this stock has been trending sideways for the last month and change, with shares moving between $4.30 on the downside and $5.24 on the upside. This sideways trend has been keeping SGYP above both its 50-day and 200-day moving averages, which is technically bullish price action. This trend has also started to coil up SGYP into a tight range, which is often what we see before a stock makes a powerful breakout.

Market players should now look for long-biased trades in SGYP once it manages to take out some near-term overhead resistance levels at $5 to $5.24 a share with high volume. Look for a sustained move or close above those levels with volume that tracks in close to or above its three-month average action of 229,859 shares. If that breakout triggers soon, SGYP could make a powerful move and possibly re-test its May high of $7.08 a share.

One can look to buy SGYP off any weakness and anticipate that breakout, and simply use a stop that sits right below some near-term support at $4.30 a share. One could also buy off strength once SGYP takes out $5 to $5.24 a share with high volume, and then simply use a stop at around $4.70 a share.

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