Breakout Alert: Sinobiopharma (OTC:SNBP)

Here's a company that had been trading down, down, down for over a year. Shareholders had hopes that the downward trend would finally be broken when the company announced the appointment of a new CFO in late September, but it wasn't until they got big news on Monday that we finally saw things turn. Now, we may be on the verge of a technical breakout based on good news, and that is very bullish.

Led by CEO, Dr. Lequn Lee Huang who is a former manager at Bayer, one of the world's largest pharmaceutical companies Diverse portfolio of marketed products and robust product pipeline Proven track record of product development and commercialization Strong financial management with CFO formerly of JP Morgan Chase and Smith Kline Beecham Nationwide sales and distribution network Patented technology for rapid low cost drug discovery Company's Flagship drug is a best seller in China Increasingly diversified and profitable portfolio

Is this the beginning of better days for Sinobiopharma, Inc. (OTC:SNBP)?

Could this bounce from the bottom run up for some time to come?

Based on the good news, the odds of that certainly look better than they did prior to yesterday.

And keep in mind, this is a stock that was trading at $4 last year!

The journey of a thousand miles, starts with one step, however, so let's begin by looking a potential trading action for Tuesday.

A little more volume and buying pressure could easily help push the shares of this suddenly polished penny pop much, much further than they did during the past session. And it doesn't look like it's going to take much to make this one run- especially if the market starts to move in the right direction during early trading. Shares closed right above resistance- which has now become support.

So what's the deal?

Well, much like the current political movement in this country, the Chinese government is undergoing a healthcare reform. And starting in January, 90 percent of China's citizens will be covered by the Far East version of a universal healthcare system.

Under the new plan, drugs on China's National Essential Drugs List (the "List") will be purchased by various levels of government offices, then distributed to medical facilities. All drugs on this List will be covered by the basic insurance plan supported by the government.

One company, SNBP, has production rights to 23 generic drugs that are listed on that Essential List- which covers pharmaceuticals used to treat up to 80 percent of the most common diseases in China.

These generic drugs have the potential to give the company some very nice production profits, especially since the company didn't have to develop a vast majority of these drugs themselves.

Long term, the news makes this penny look even more shiny and attractive.

According to recent reports, economic conditions are expected to continue to boost the growth of the pharmaceutical industry in China. The health of these drug developers and manufacturers has been improving continuously for the past nine years and it's expected to get even better since the Chinese pharmaceuticals market is forecast to become the world's firth largest by 2010 - and the largest by 2050.

Already, SNBP has an established nationwide sales and marketing network that distributes its products in 30 provinces and key major cities throughout China and this health care reform program's built-in distribution platform is only going to make it that much stronger.

Prior to this announcement, the company had already been working to expand its sales and marketing infrastructure to meet China's rapidly growing demand for safer, lower-cost, higher-efficacy drugs.

"While Sinobiopharma is primarily focused on the development, production and distribution of the "me-too/me-better" branded new or generic drugs with high margins, the inclusion of 23 generic drugs for which the Company owns production rights on the National Essential Drugs List, will enable us to increase both sales and margins," said Dr. Lequn Lee Huang, Sinobiopharma's new President and CEO. "We expect that this new advantage in the marketplace will also enable the Company to enhance our ability to improve return on investment for shareholders in 2010."

Last month, the company unveiled record revenues and increases in both gross margin and net profit. The company also reached a milestone by posting its first overall net profitable quarter since the second quarter 2008.

Here's the beautiful looking chart: In addition to the notations, notice also that the MACD has just turned bullish and RSI (Relative Strenght Index) is climbing up nicely.

Disclosure: Long SNBP