5 Stocks Poised for Breakouts

Orexigen Therapeutics

Yet another stock in the biotechnology and drugs complex that's trading within range of triggering a near-term breakout trade is Orexigen Therapeutics (OREX), which is focused on the development of pharmaceutical product candidates for the treatment of obesity. This stock has been a favorite name for the bulls, with shares up over 260% so far in 2012.

If you look at the chart for Orexigen Therapeutics, you'll see that this stock has been uptrending very strong for the last three months, with shares soaring from a low of $3.76 to its recent high of $6.49 a share. During that uptrend, shares of OREX have been consistently making higher lows and higher highs, which is bullish technical price action. The stock has also just started to bounce right off its 50-day at $5.41 a share, and it's quickly moving within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in OREX if it can manage to break out above some near-term overhead resistance at $6.49 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 2.2 million shares. If that breakout triggers soon, then OREX will set up to re-test or possibly take out its next major overhead resistance level at $7.73 a share. Any high-volume move above $7.73 will put $8 to $10 a share into focus for OREX.

Traders can look to buy OREX off weakness as long as it's trending within range of its 50-day at $5.41 a share. Simply use a stop a few percentage points below its 50-day, possibly down near $5 a share. One can also buy off strength once OREX takes out $6.59 with volume and then simply use a stop at around $6 a share. I would look to add to either position once OREX clears $7.73 with high volume.

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