DELAFIELD, Wis. (Stockpickr) -- The biotech sector is on fire -- and I mean a five-alarm fire!

Just take a look at the performance of the iShares Nasdaq Biotechnology Index (IBB), which is already up 20% so far in 2014. Over the last year, the IBB has risen an even more impressive 87%. As a trend-following trader, I look for a hot sector first, and then I drill down into that sector to find favorable chart setups. I have been doing this for quite some time with the red-hot biotech sector.

One of my recent biotech stock picks that's exploding higher today is Inovio Pharmaceuticals (INO), which I featured in Feb. 10's "5 Biotech Stocks to Trade in February" at $2.72 share. I mentioned in that piece that traders should keep an eye on shares of INO for a big breakout trade if it could manage to take out some near-term overhead resistance levels at $2.97 to $3 a share with high volume.

>>5 Stocks Ready to Explod on Bullish Earnings

Guess what happened? Shares of INO exploded higher last Friday and took out those key overhead resistance levels with monster upside volume. Shares of INO are exploding higher again today, with the stock up 13% at $3.66 as I write. I knew the biotech sector was hot and that INO was the perfect setup, and I don't think this stock is done with its move. Traders should now watch for INO to clear $4 a share with strong volume for potentially more upside.

Despite all the bubble talk, I don't think the biotech sector is anywhere near done going higher. This sector has a lot of favorable headwinds, including faster drug approval legislation, M&A activity and, my favorite, a clear uptrend in place. For those reasons, I want to continue to dig into this sector to find the next explosive movers.

With that in mind, here's a look at five potentially explosive biotech stock plays.

Intercept Pharmaceuticals


One development stage biopharmaceutical player that's starting to trend within range of triggering a big breakout trade is Intercept Pharmaceuticals (ICPT), which focuses on the development and commercialization of novel therapeutics to treat chronic liver diseases utilizing its proprietary bile acid chemistry. This stock has obliterated the bears so far in 2014, with shares up a gigantic 454%.

If you take a glance at the chart for Intercept Pharmaceuticals, you'll see that this stock has been consolidating and trending sideways for the last few weeks, with shares moving between $342.70 on the downside and $388 on the upside. Shares of ICPT are now starting to uptick and quickly move within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in ICPT if it manages to break out above some near-term overhead resistance levels $381 to $388 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 769,998 shares. If that breakout materializes soon, then ICPT will set up to potentially rip sharply higher since there is no real resistance until $450 to its all-time high at $497 a share. I am not saying it will hit those levels, but traders should definitely look to play this breakout for a big move of 20 to 30 points.

Traders can look to buy ICPT off any weakness to anticipate that breakout and simply use a stop that sits right around some near-term support levels around $360 to $356.40 a share. One can also buy ICPT 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.

BG Medicine


One diagnostics player that could be setting up to rip sharply higher here is BG Medicine (BGMD), which engages in the development and commercialization of novel cardiovascular diagnostic tests to address unmet medical needs in the U.S. This stock has been in play with the bulls big time over the last three months, with shares up sharply by 117%.

If you consult the chart for BG Medicine, you'll see that this stock has been uptrending over the last few weeks, with shares moving higher from its low of $1.10 to its recent high of $1.38 a share. During that uptrend, shares of BGMD have been consistently making higher lows and higher highs, which is bullish technical price action. That move is now starting to push shares of BGMD within range of triggering a major breakout trade above a key downtrend line that started last December.

Traders should now look for long-biased trades in BGMD if it manages to break out above some near-term overhead resistance levels at $1.30 to $1.38 a 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 volume of 2.08 million shares. If that breakout hits soon, then BGMD will set up to re-test or possibly take out its next major overhead resistance levels at $1.57 to $1.65 a share or $1.70 a share. Any high-volume move above those levels will then give BGMD a chance to tag $2 to $2.20 a share.

Traders can look to buy BGMD off any weakness to anticipate that breakout and simply use a stop that sits right below its 200-day moving average of $1.09 a share. One can also buy BGMD off strength once it starts to rip above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Galectin Therapeutics


Another stock that could be setting up to trend sharply higher here is Galectin Therapeutics (GALT), which engages in the development of therapies for cancer and fibrotic disease. This stock has been exploding to the upside so far in 2014, with shares up huge by 91%.

If you take a look at the chart for Galectin Therapeutics, you'll see that this stock recently formed a triple bottom chart pattern at $11.19, $11.36 and $11.75 a share. Following that bottom, shares of GALT ripped higher and broke out above some near-term overhead resistance levels at $14.18 to $14.33 a share. So far, shares of GALT have continued to trend above those breakout levels and the stock now looks ready to potentially spike higher and trigger an even bigger breakout trade.

Traders should now look for long-biased trades in GALT if it manages to break out above some near-term overhead resistance levels at $16.70 to its 52-week high at $17.88 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 607,621 shares. If that breakout begins soon, then GALT will set up to rip sharply higher and enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $23 to $25 a share, or even north of $25 a share.

Traders can look to buy GALT off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $14.50 to $14 a share. One could also buy GALT off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Coronado Biosciences


Another biotechnology player that could be setting up for a massive move higher is Coronado Biosciences (CNDO), which focuses on the development of immunotherapy biologic agents for the treatment of autoimmune diseases and cancer. This stock has been on fire over the last three months, with shares up a whopping 89%.

If you take a glance at the chart for Coronado Biosciences, you'll notice that this stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $2.42 to its intraday high of $2.81 a share. During that move, shares of CNDO have been making mostly higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of CNDO within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in CNDO if it manages to break out above some near-term overhead resistance levels at $2.84 to $3 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 1.89 million shares. If that breakout gets underway soon, then CNDO will set up to potentially rip higher and re-test or possibly take out its next major overhead resistance level at $3.31 a share. Any high-volume move or close above $3.31 will then give CNDO a chance to re-fill some of its previous gap-down-day zone from last October that started above $6 a share.

Traders can look to buy CNDO off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.50 to $2.42 a share. One can also buy CNDO 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.

Biodel


My final biotech idea that could be preparing to soar sharply higher here is Biodel (BIOD), which focuses on the development and commercialization of treatments for diabetes in the U.S. This stock is off to a very strong start in 2014, with shares up sharply by 40%.

If you look at the chart for Biodel, you'll notice that this stock has been uptrending strong over the last month, with shares moving higher from its low of $2.50 to its recent high of $3.44 a share. During that uptrend, shares of BIOD have been making mostly higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of BIOD 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 BIOD if it manages to break out above some near-term overhead resistance levels at its 200-day moving average of $3.41 a share to more near-term overhead resistance levels at $3.44 to $3.50 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 609,441 shares. If that breakout hits soon, then BIOD will set up to potentially explode sharply higher and re-fill some of its previous gap-down-day zone form last September that started just above $4.50 a share.

Traders can look to buy BIOD off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $3 to $2.95 a share or down near its 50-day moving average at $2.75 a share. One can also buy BIOD off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

To see more biotech stocks that have potentially explosive chart setups, check out the Explosive Biotech Stock Setups portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


RELATED LINKS:







Follow Stockpickr on Twitter and become a fan on Facebook.

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

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.