The Latest Biotech Breakout: XOMA Corporation

At this point, who knows when the market rally will cool off?

Everyday it just seems like its just up, up and up again. Eventually, the markets will pullback a bit, but until they do, investors and traders will ride the gravy train as long as it goes.

Thanks to the market run-up a lot of stocks already seem somewhat extended. However, there are some stocks that are a little late to the party and are just now breaking higher.

For example, Celldex (NASDAQ: CLDX) just broke out above its $18 resistance only a week or so ago. In that period of time that stock has already hit a high of over $21.

Another biotech name that just broke out this week, and whose chart looks very similar to Celldex, would be Xoma.

XOMA Corporation discovers and develops antibody-based therapeutics in the United States, Europe, and the Asia Pacific.

The company’s proprietary products include XOMA metabolic activating, sensitizing, and antagonizing/deactivating antibodies that are in preclinical stage for the treatment of diabetes patients, a multi-antibody product for the treatment of human botulism poisoning, and a topical anti-bacterial product for the treatment of human immune system.

Review the 1-year chart of XOMA with the added notations:

After losing over 60 percent of its value, XOMA finally found a bottom in May near $3.50 a share.

Since that bottom, the stock has been trading in a well-defined range between a low of around $3.60 and a topside resistance at $5. This sideways range appears to have been a basing process for XOMA.

Earlier this week XOMA broke through its $5 resistance and did so with a large increase in volume. High volume tends to add validity to a breakout.

Commonly, when stocks form XOMA’s type of pattern and breakout, higher prices overall can be expected.

The stock closed yesterday at $5.52.

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key.

Posted to The Biotech Trader on Nov 26, 2014 — 9:11 AM
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