Another under-$10 name that's starting to trend within range of triggering a near-term breakout trade is Sucampo Pharmaceuticals (SCMP - Get Report), a biopharmaceutical company focused on the discovery, development and commercialization of proprietary drugs based on prostones, a class of compounds derived from functional fatty acids that occur naturally in the human body. This stock has been moving up notably over the last six months, with shares up 14%.
If you take a look at the chart for Sucampo Pharmaceuticals, you'll notice that this stock recently traded down to $4.55 a share and found some buying interest. That $4.55 level is very close to some key previous support levels from last November at $4.51 to $4.54 a share. It looks like shares of SCMP have formed a double bottom at those levels and it is now starting to challenge both its 50-day at $5.14 a share and its 200-day at $5.20 a share. That move is quickly pushing shares of SCMP within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in SCMP if it manages to break out above its 200-day moving average at $5.20 a share and then once it clears more near-term overhead resistance levels at $5.42 to $5.53 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 94,210 shares. If that breakout triggers soon, then SCMP will set up to re-test or possibly take out its next major overhead resistance levels at $6.25 a share. Any high-volume move above $6.25 will then give SCMP a chance to re-fill some of its previous gap down zone from last July that started near $7 a share.Traders can look to buy SCMP off any weakness to anticipate that breakout and simply use a stop that sits right below today's low of $5 a share. One could also buy SCMP off strength once it takes out those breakout levels with volume and then simply use the same stop right around its 50-day at $5.14 a share.