One under-$10 name that's trading within range of triggering a major breakout trade is Xoma ( XOMA), which discovers and develops antibody-based therapeutics. This stock is off to a monster start in 2012, with shares up over 163%.

If you take a look at the chart for Xoma, you'll see that this stock has been uptrending strong for the last six months, with shares soaring from a low of $1.11 to a recent high of $3.14 a share. During that sharp move higher, shares of Xoma have mostly made higher lows and higher highs, which is bullish price action.

This stock recently formed a double bottom at around $2.22 to $2.25 a share. After forming that bottom, shares of Xoma have ripped higher back above its 50-day moving average of $2.63, and it's started to break out above some near-term overhead resistance at $2.73 to $2.79 a share. That move has now pushed Xoma within range of triggering a much bigger breakout trade.

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Market players should now look for long-biased trades in Xoma if it can manage to trigger a major breakout trade above some past overhead resistance levels at $3.14 to $3.60 a share with high-volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 855,923 shares. If we get that action soon, then XOMA will have a great chance of re-filling a previous gap-down from 2011 that could take the stock back towards $5 a share.

If you like the look of Xoma here, then I would look to buy this stock off any weakness and simply use a stop at around its 50-day moving average of $2.63 a share. I would add to any long positions above $3.14 a share, and then add again once it takes out $3.60 a share with heavy volume. One could buy off strength and get long above $3.14 or $3.60 with stops just a few percentage points below those levels.

Keep in mind that Xoma sports a decent short interest, since 7.4% of its tradable float is currently sold short by the bears. If that breakout triggers soon, then we could easily see a large short-squeeze setoff that takes Xoma back into that gap from 2011.

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