Astex Pharmaceuticals

Another under-$10 name that looks ready to break out here is drug developer Astex Pharmaceuticals ( ASTX), which engages in the discovery and development of small molecule therapeutics with a focus on oncology and hematology. This stock is off to a decent start in 2012, with shares up around 12%.

If you take a look at the chart for Astex Pharmaceuticals, you'll notice that this stock recently formed a double bottom chart pattern at around $1.57 to $1.58 a share in May. After making that bottom, shares of Astex Pharmaceuticals have started to uptrend strong, with shares mostly making higher lows ad higher highs, which is bullish technical price action. That move has pushed ASTX within range of triggering a major breakout trade.

>>5 Health Care Stocks Setting Up to Break Out

Traders should now look for long-biased trades in ASTX if it can manage to trigger a break out trade above some near-term overhead resistance at $2.17 a share, and then above some past resistance at $2.20 a share with high-volume. Look for a sustained move or close above those levels on volume that's near or above its three-month average action of 380,606 shares. If we get that action soon, then ASTX could have some major upside towards $2.95 a share, or possibly higher. That move will likely happen if ASTX moves into its previous gap-down above $2.60 a share.

One could be a buyer of ASTX off weakness to anticipate the breakout, and simply use a stop right below some major near-term support at $2 a share. You could even put the stock right below its 50-day moving average of $1.82 a share if you want to give it more room. One could also just buy off strength and get long above $2.17 to $2.20 once those levels are taken out with high-volume. I would simply use a stop a few percentage points below those levels if you get long off strength.

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