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5 Stocks Poised for Breakouts


One stock that's trending within range of triggering a near-term breakout trade is Affymax (AFFY), a biopharmaceutical company committed to developing novel drugs to improve the treatment of serious and often life-threatening conditions. This stock has been destroyed by the sellers so far in 2013, with shares off by a whopping 85%.

Shares of AFFY were pounded lower by 85% on Monday after reports of severe allergic reactions in some kidney-disease patients, culminating in at least five deaths, prompted the firm to recall its flagship antianemia drug Omontys.

>>4 Stocks Under $10 Moving Higher

If you take a look at the chart for Affymax, you'll see that this stock gapped down huge on Monday with massive downside volume, from over $16 to its recent low of $2.34 a share. Following that gap down in price, shares of AFFY have rebounded slightly to its recent high of $2.82 a share. This stock has now entered extremely oversold territory, since its current relative strength index reading is 11.33. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.

Traders should now look for long-biased trades in AFFY if it manages to break out above some near-term overhead resistance at $2.82 a share high volume. Look for a sustained move or close above $2.82 a share with volume that hits near or above its three-month average action of 2.41 million shares. If that breakout triggers soon, then I expect to see a very large tradable bounce that could easily spike shares of AFFY by 30% to 40%.

Traders can look to buy AFFY off any weakness to anticipate that breakout and simply use a stop that sits just below $2.34 a share. One could also buy off strength once AFFY takes out $2.82 a share with volume and then simply use a stop that that's a reasonable percentage from your entry.

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