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5 Biotech Stocks Poised for Breakouts

Written by: Roberto Pedone 07/27/12 - 1:34 PM EDT
Tickers in this article: GERN VPHM SGMO DYAX TSPT

If you look at the chart for GERN, you'll see that this stock has been trading within range for the past month, with shares moving between $1.50 and $1.79 a share. That move has also started to coil up the stock between its 50-day moving average at $1.52 and its 200-day moving average of $1.73 a share. Traders should now look to play a move in GERN above its 200-day at $1.73 and above the upper end of that range. A high-volume move above those levels could spark a huge move higher in this stock.

Traders should now look for long-biased traders in GERN if this stock can manage to clear its 200-day at $1.73 a share, and then take out some more overhead resistance at $1.79 to $1.89 a share with high volume. Look for a sustained move or close above those levels with volume that's near or above 688,470 shares. If we get that action soon, then GERN could easily re-test and possibly take out its next major overhead resistance levels at $2.22 to $2.60 a share.

One could be a buyer of GERN off any weakness, and simply use a stop around $1.60 or even just below $1.50 a share. You could also just buy off strength once GERN once GERN starts to challenge those breakout levels, and then simply use a stop that sits a few percentage points below its 200-day moving average. Dyax

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One more stock that's setting up to trigger a major breakout trade is biotechnology and drugs player Dyax (DYAX) , which focuses on identifying, developing and commercializing treatments for conditions identified as plasma kallikrein (bradykinin) mediated angioedema, including hereditary angioedema, ACE inhibitor-induced angioedema and angioedema. This stock is off to a blazing hot start in 2012, with shares up a whopping 100%.

If you look at the chart for DYAX, you'll see that this stock has been uptrending strong for the past six months, with shares soaring from a low of $1.33 to a recent high of $2.88 a share. During that monster uptrend, shares of DYAX have been consistently making higher lows and higher highs, which is bullish technical price action. That move is now quickly pushing DYAX within range of triggering a major breakout trade.