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5 Stocks Ready to Break Out

Stocks in this article: HSOLARTXFXENEBIXAMEDPTIE

Pain Therapeutics

My final breakout trading prospect is Pain Therapeutics ( PTIE), a biopharmaceutical company that develops novel drugs. It has four drug candidates in clinical programs, including Remoxy, Oxytrex, PTI-202 and a novel radio-labeled monoclonal antibody to treat metastatic melanoma. This stock is off to a slow start in 2013, with shares up just 3% so far.

>>5 Trades to Take From the Health Care Sector

If you look at the chart for Pain Therapeutics, you'll notice that this stock has formed a major bottoming chart pattern over the last month and change, since shares have found buying interest each time it has pulled back to around $2.50 a share. This stock is now starting to spike higher off its 50-day moving average of $2.61 a share, and its flirting with its 200-day moving average at $2.83 a share. That move is quickly pushing shares of PTIE within range of triggering a major breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in PTIE if it manages to break out above some near-term overhead resistance at $3.05 a share with high volume. Look for a sustained move or close above $3.05 a share with volume that hits near or above its three-month average action of 280,177 shares. If that breakout triggers soon, then PTIE will set up to re-test or possibly take out its next major overhead resistance level at $3.45 a share. Any high-volume move above $3.45 will then give PTIE a chance to re-fill some of its previous gap down zone from May that started near $5.50 a share.

Traders can look to buy PTIE off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.58 to $2.46 a share. One could also buy PTIE off strength once it takes out $3.05 a share with volume and then simply use a stop that sits a conformable percentage from your entry point. I would add to either position once PTIE takes out $3.45 a share with solid upside volume.

To see more breakout candidates, check out the Breakout Stocks of the Week portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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