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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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 and You can follow Pedone on Twitter at or @zerosum24.

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