5 Biotech Stocks Poised for Breakouts

DELAFIELD, Wis. (Stockpickr) -- Trading stocks that trigger major breakouts can lead to massive profits. Once a stock trends to a new high or takes out a prior overhead resistance point, then it's free to find new buyers and momentum players who can ultimately push the stock significantly higher.

Breakout candidates are something that I tweet about on a daily basis. I frequently tweet out high-probability setups, breakout plays and stocks that are acting technically bullish. These are the stocks that often go on to make monster moves to the upside. What's great about breakout trading is that you focus on trend, price and volume. You don't have to concern yourself with anything else. The charts do all the talking.

Trading breakouts is not a new game on Wall Street. This strategy has been mastered by legendary traders such as William O'Neal, Stan Weinstein and Nicolas Darvas. These pros know that once a stock starts to break out above past resistance levels and hold above those breakout prices, then it can easily trend significantly higher.

With that in mind, here's a look at five stocks that are setting up to break out and possibly trade higher from current levels.

Venaxis

One vitro diagnostic player that's starting to trend within range of triggering a major breakout trade is Venaxis  (APPY), which engages in the development and commercialization of products for unmet diagnostic and therapeutic needs. This stock has been slammed lower by the bears over the last six months, with shares down huge by 67.5%.

If you take a look at the chart for Venaxis, you'll see that this stock has been attempting to carve out a major bottoming chart pattern over the last month, with shares finding buying interest at 53 to 50 cents per share. A lot of that buying interest has come right around or above APPY's 50-day moving average. This stock spiked modestly to the upside on Thursday and displayed relative strength versus the overall market weakness. That spike is now quickly pushing shares of APPY within range of triggering a major breakout trade above a key downtrend line.

Traders should now look for long-biased trades in APPY if it manages to break out above that downtrend line that will trigger over 60 to 63 cents per 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 597,208 shares. If that breakout triggers soon, then APPY will set up to re-test or possibly take out its next major overhead resistance levels at 70 cents per share. Any high-volume move above 70 cents will then give APPY a chance to re-fill some of its previous gap-down-day zone from January that started at $2 a share.

Traders can look to buy APPY off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at 53 to 50 cents per share. One can also buy APPY off strength once it starts to clear breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

IGI Laboratories


A specialty generic pharmaceutical player that's quickly moving within range of triggering a big breakout trade is IGI Laboratories  (IG), which develops, manufactures and markets topical formulations in the U.S. This stock has been hammered lower by the sellers over the last three months, with shares dropping to the downside by 38.6%.

If you take a glance at the chart for IGI Laboratories, you'll notice that this stock has been uptrending over the last month, with shares moving higher from its low of $4.75 to its recent high of $6.64 a share. During that uptrend, shares of IG have been consistently making higher lows and higher highs, which is bullish technical price action. This downtrend is coming after shares of IG gapped down huge in last April from around $8.50 a share to its new 52-week low of $4.75 a share. The recent uptrend has now pushed shares of IG 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 IG if it manages to break out above some near-term overhead resistance levels at $6.64 a share to its 50-day moving average of $7.05 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.23 million shares. If that breakout kicks off soon, then IG will set up to re-fill some of its previous gap-down-day zone from April that started near $8.50 a share.

Traders can look to buy IG off weakness to anticipate that breakout and simply use a stop that sits right around some near-term support at $6 a share or near $5.50 a share. One could also buy IG off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Atara Biotherapeutics


Another clinical-stage biopharmaceutical player that's starting to trend within range of triggering a big breakout trade is Atara Biotherapeutics  (ATRA), which focuses on developing therapeutics for the treatment of muscle wasting conditions and oncology. This stock has been on fire over the last three months, with shares up huge by 62.7%.

If you take a glance at the chart for Atara Biotherapeutics, you'll see that this stock formed a double bottom chart pattern in early May at $36.50 to $36 a share. Following that bottom, shares of ATRA have started to uptrend strong, with the stock moving higher from its low of $36 to its recent high of $44.15 a share. That uptrend has now pushed shares of ATRA within range of taking out its 50-day moving average and potentially breaking out above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in ATRA if it manages to break out above its 50-day moving average of $43.44 a share and then once it clears some key near-term overhead resistance levels at $44.15 to around $45 a share with high volume. Watch for a sustained move or close above those levels with volume that registers near or above its three-month average action of 200,909 shares. If that breakout hits soon, then ATRA will set up to re-test or possibly take out its next major overhead resistance levels at $50 to $55 a share, or even its all-time high of $64.35 a share.

Traders can look to buy ATRA off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $40.33 to $39.21 a share. One can also buy ATRA off strength once it starts to trend above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Theravance

Another stock that's starting to trend within range of triggering a big breakout trade is Theravance  (THRX), which is focused on developing respiratory products. This stock has been in play with the bulls over the last six months, with shares soaring sharply higher by 33.2%.

If you take a glance at the chart for Theravance, you'll notice that this stock formed a double bottom chart pattern over the last few months, with shares finding buying interest at $15.01 to $14.88 a share. Following that bottom, shares of THRX have started to uptrend and trade back above both its 50-day and 200-day moving averages. This stock counter-trended higher on Thursday versus the overall market weakness right off its 50-day moving average of $16.58 a share with decent upside volume flows. That move has now pushed shares of THRX within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in THRX if it manages to break out above a key downtrend line that will start to trigger over resistance at $17.30 to $18 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 745,872 shares. If that breakout materializes soon, then THRX will set up to re-test or possibly take out its next major overhead resistance levels at $18.61 to $19 a share, or even $20.90 to $23.12 a share.

Traders can look to buy THRX off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $16 to $15 a share. One can also buy THRX off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Karyopharm Therapeutics


My final breakout trading prospect is clinical-stage pharmaceutical player Karyopharm Therapeutics  (KPTI), which focuses on the discovery and development of drugs directed against nuclear transport targets for the treatment of cancer and other major diseases. This stock has been under heavy selling pressure over the last six months, with shares moving sharply to the downside by 38.1%.

If you look at the chart for Karyopharm Therapeutics, you'll notice that this stock recently formed a major bottoming chart pattern, after shares founding buying interest at $24.72 a share. That $24.72 level is just above a previous low for this stock from January that was at $24.35 a share. Shares of KPTI have now started to spike to the upside and uptrend a bit, with the stock rising from $24.72 to its recent high of $27.77 a share. That move has now pushed shares KPTI within range of triggering a near-term breakout trade above some key overhead resistance levels.

Traders should now look for long-biased trades in KPTI if it manages to break out above some key near-term overhead resistance levels at $27.91 to just over $28 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 364,728 shares. If that breakout develops soon, then KPTI will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $29.48 to $30.82 a share, or even its 200-day moving average of $33.26 a share to $35.65 a share.

Traders can look to buy KPTI off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $26 or down near those double bottom support levels at $24.72 to $24.35 a share. One can also buy KPTI off strength once it starts to move above those breakout levels with volume and then simply use a stop that sits a conformable percentage from your entry point.

At the time of publication, author had a long position in shares of APPY.

This article is commentary by an independent contributor. At the time of publication, the author was long APPY.

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