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5 Biotech Stocks Under $10 Set to Soar

Written by: Roberto Pedone 07/19/12 - 11:58 AM EDT
Tickers in this article: DEPO SQNM NAVB GNOM HALO

If you like the setup here for GNOM here, then I would look to buy this stock off weakness and anticipate the breakout. I would use a stop near $2.50 a share, or possibly closer to the 50-day moving average of $2.09 if we get a bigger selloff soon. I would prefer to buy off strength once GNOM takes out $3.34 to $3.50 with heavy volume, and then simply use a stop right below the 200-day at $3.23 a share.

Keep in mind that the current short interest as a percentage of the float for GNOM is rather high at 8%. This stock also has a ridiculously low tradable float of just 19.35 million shares. Any future breakout could easily trigger a monster short-squeeze, so keep this stock on your trading radar. Navidea Biopharmaceuticals

Another under-$10 stock in the biotechnology and drugs complex that looks ready to trigger a near-term breakout trade is Navidea Biopharmaceuticals (NAVB) , which is focused on the development and commercialization of precision diagnostic agents. This stock has soared over 60% in just the last three months.

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If you take a look at the chart for Navidea Biopharmaceuticals, you'll see that this stock triggered a major breakout back in late June once it smashed through some previous overhead resistance at $3.47 to 3.55 a share with monster upside volume. Following that breakout, shares of NAVB soared to its recent high near $4.45 a share. During that monster run, the upside volume for NAVB has been off the charts for most of June and July. Since hitting that high at $4.45, shares of NAVB have started to move sideways between $4.40 and $4.09 a share. A move outside of that range will now setup the next major trend for NAVB.

>>Hot Biotech Stocks Traded by Hedge Funds

Traders should now look for long-biased trades in NAVB if it can manage to trigger a breakout trade above some near-term overhead resistance at $4.45 a share with high volume. Look for volume off a sustained move or close above $4.45 that registers near or above its three-month average action of 548,951 shares. If that breakout triggers soon, then NAVB will have a great chance of re-testing and possibly taking out its 2011 high of $5.48 a share.