An under-$10 stock that's already starting to trigger a major breakout trade is Cadence Pharmaceuticals (CADX), which is focused on in-licensing, developing and commercializing product candidates mainly for use in the hospital setting. This stock is off to a decent start in 2013, with shares up 19%.
If you take a look at the chart for Cadence Pharmaceuticals, you'll notice that this stock is just starting to explode off its 50-day moving average of $5.08 a share with solid upside volume. Volume so far today has registered 239,000 shares, which is on pace to easily surpass its three-month average action of 269,172 shares. This move has started to push shares of CADX back above some key near-term overhead resistance levels at $5.46 to $5.66 a share, since the stock has hit an intraday high of $5.73 a share.
Traders should now look for long-biased trades in CADX if it manages sustains a move or close above those breakout levels at $5.46 to $5.66 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 269,172 shares. If CADX can sustain this breakout, then the stock will set up to re-test or possibly take out its next major overhead resistance levels at $7 to $7.78 a share.Traders can look to buy CADX off any weakness and simply use a stop that sits just below its 50-day moving average of $5.08 a share.