By Stockpickr Staff
Posted on June 18, 2009

Biotech is always an exciting sector for market players to invest in. The space is full of high risk but also high reward for investors who can stomach the volatility.

In just 2009 alone, we have seen some amazing moves in biotech stocks, including Dendreon (DNDN), Vanda Pharmaceuticals (VNDA) and Cell Therapeutics (CTIC). In the case of Dendreon and Vanda, both companies received favorable FDA rulings that sent their stocks skyrocketing. A drug approval for an early stage biotech stock is a very big development for these companies. Often these firms are struggling to stay in business as research and developments costs eat through their cash positions.

Unfortunately, the only way that biotech companies have a chance at coming to market with a successful drug is by spending money on R&D. A good way to gauge how well a biotech company is doing is to simply follow the FDA trials for its key drugs. If you follow the trials, you can see if any potential drug is advancing or showing positive results. Of course, these trials make for great catalysts for the stocks, especially when there is bullish news.

A great place to find information about upcoming clinical trials is TheStreet.com’s Adam Feuerstein’s Biotech Calendar, which lists companies coming up on trials for phase II and phase III studies. Combine that key information with an unemotional view of a potential company’s stock chart, and you might be able to spot some big opportunities in the biotech sector.

Considering that there are a number of companies poised to report key clinical results, it might be well worth the time to evaluate their charts. Let’s take a look at the charts of a few biotech stocks that could be setting up to make big moves.

1. Hemispherx BioPharma

One interesting chart belongs to Hemispherx BioPharma (HEB), a biopharma company engaged in the development of new drug therapies based on natural immune-system-enhancing technologies for the treatment of chronic disorders. This company is currently awaiting FDA news on the potential U.S. approval of its drug Ampligen for chronic fatigue syndrome. If the drug is approved, the stock could be set to make a monster move.

Looking at the chart below, you can see that Hemispherx had been making a great-looking pattern of higher highs and higher lows before the stock finally sold off at $4.50 a share. The shares are now consolidating and finding some strong support at around $2.20 a share. If the stock can manage to hold that level, it could be setting up to make an assault at $3 or possibly make a run back toward $4.50. It’s also worth noting that more than 8.5% of the float is currently sold short, so any drug approval could sky rocket this stock above $10 a share. If you think Ampligen will get approval, it is probably very important for the stock to hold the $2.20 support.



2. Jazz Pharmaceuticals

Next up is Jazz Pharmaceuticals (JAZZ). This company is a specialty pharmaceutical firm focused on developing and commercializing products to meet unmet medical needs in neurology and psychiatry.

Have a look at the chart below, and you’ll see a stock that ran into some heavy resistance at around $5.10 a share following a very large run that started at $1. That large run occurred after the company reported some very positive results for its fibromyalgia drug. The company hopes to file for U.S. approval of the drug by the end of 2009. If you’re looking to buy this stock, you might want to get in around $3 to $2.50 a share, which are areas of previous support. You could also buy the stock if it manages to breakout above $5.10 to $5.50 a share. A break above those levels would be significant and could mean the stock is ready to make a run at $9 a share.



3. Poniard Pharmaceuticals

Another interesting biotech stock is Poniard Pharmaceuticals (PARD). This biotech company is focused on the development and commercialization of cancer therapy products. Recently, the company announced favorable results for its experimental drug picoplatin, which treats advanced colorectal cancer and advanced prostate cancer.

Check out the chart below and you will see that Poniard recently hit some heavy resistance at around $5.50 a share. The stock now looks ready to pull back toward $4 to $3.20 a share. If Poniard can find some support around those levels, it could make for a good entry point if you’re bullish on this company. Any break above $5.50 to $6.39 would be very bullish and represent a breakout that could take shares to $9 or possibly even higher.



4. Incyte

Today's final compelling biotech stock is Incyte (INCY), a drug discovery and development firm focused on developing small molecule drugs to treat serious unmet medical needs.

Looking at the chart below, you’ll see that recently Incyte ran into some heavy resistance at around $4.10 to $4.20 a share, and at the time that the stock hit that level, it also marked the 200-day moving average. Since hitting that level, the stock has sold off significantly and is now approaching the 50-day moving average of $2.76. If you’re bullish on Incyte and its drug candidates, you might want to look to buy this name around $2.76.

A major catalyst for this company will come late this summer when it announces clinical phase II trials for its psoriasis drug. It’s also worth noting that over 12% of the float is currently sold short, so any positive drug news will surely send this stock through the roof.



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