DELAFIELD, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for $10 a share or less don't experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.
Just take a look at some of the hot movers in the under-$10 complex from Thursday, including GenVec (GNVC), which is skyrocketing higher by 39%; OCZ Technology (OCZ), which is soaring higher by 23%; Baxano Surgical (BAXS), which is ripping higher by over 26%; and CytRx (CYTR), which is spiking higher by 22%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
One low-priced stock that recently spiked big after I featured it was development-stage healthcare player Atossa Genetics (ATOS), which I highlighted in Dec. 9's "5 Stocks Poised for Breakouts" at $2.60 per share. I mentioned in that piece that shares of Atossa Genetics were uptrending strong over the last month, with shares moving higher from its low of $1.74 to its recent high of $2.73 a share. That move had pushed shares of ATOS within range of triggering a major breakout trade if the stock could manage to clear its 50-day at $2.55 a share and some more near-term overhead resistance at $2.73 a share with high volume.
Guess what happened? Shares of Atossa Genetics didn't wait long to trigger that breakout, since the stock took out those key overhead resistance levels with strong volume on the same day as my article published. Shares of ATOS hit an intraday high the following trading session at $3.10 a share, which represents a gain of close to 20% for anyone who bought the stock near $2.60 in anticipation of the breakout. That's a solid gain a very short timeframe for anyone who played this setup. This stock is still worth watching if it can hold its 50-day on any pullback which sits at $2.33 a share, and then take out resistance at $3.10 with volume. A big gap down zone from October could come into play if ATOS can ever clear $3.18 a share.
Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, breakout candidates and low-priced stocks that are acting technically bullish. I like to hunt for low-priced stocks that are showing bullish price and volume trends, since that increases the probability of those stocks heading higher. These setups often produce monster moves higher in very short time frames.
I'm not as eager to recommend investing long-term in stocks that trade less than $10 a share because these names can be very speculative, and the odds for picking the long-term winners aren't great. But I definitely love to trade stocks that are priced below $10. I like to view them as a trading vehicle with lots of volatility and lots of upside when the trade is timed right.
When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.
With that in mind, here's a look at several under-$10 stocks that look poised to trade higher from current levels.
Idera Pharmaceuticals
One under-$10 clinical stage biotechnology player that's starting to move within range of triggering a major breakout trade is Idera Pharmaceuticals (IDRA), which is engaged in the discovery and development of novel synthetic DNA- and RNA-based drug candidates. This stock has been on fire so far in 2013, with shares up huge by 221%.
If you take a look at the chart for Idera Pharmaceuticals, you'll notice that this stock has been uptrending strong for the last month, with shares soaring higher from its low of $1.55 to its intraday high of $3.10 a share. During that uptrend, shares of IDRA have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed share of IDRA within range of triggering a major breakout trade. In fact, shares of IDRA are ripping higher today by over 10% with strong upside volume as the stock moves close to entering breakout territory.
Traders should now look for long-biased trades in IDRA if it manages to break out above its 52-week high at $3.12 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 1.45 million shares. If that breakout triggers soon, then IDRA will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $4 to $4.50 a share.
Traders can look to buy IDRA off any weakness to anticipate that breakout and simply use a stop that sits right below $2.50 a share, or near its 50-day at $2.22 a share. One can also buy IDRA off strength once it starts to take out $3.12 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.
Andatee China Marine Fuel Services
Another under-$10 energy player that's starting to move within range of triggering a big breakout trade is Andatee China Marine Fuel Services (AMCF), which is engaged in the production, storage, distribution and wholesale purchases and sales of blended marine fuel oil for cargo and fishing vessels. This stock has been in play with the bulls so far in 2013, with shares up big by 180%.
If you take a look at the chart for Andatee China Marine Fuel Services, you'll notice that this stock has been uptrending strong over the last month and change, with shares moving higher from its low of 98 cents per share to its recent high of $1.69 a share. During that move, shares of AMCF have been making mostly higher lows and higher highs, which is bullish technical price action. That move is now starting to push shares of AMCF within range of triggering a big breakout trade above a key downtrend line.
Market players should now look for long-biased trades in AMCF if it manages to break out above some near-term overhead resistance levels at $1.69 to $1.80 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 215,352 shares. If that breakout hits soon, then AMCF will set up to re-test or possibly take out its next major overhead resistance levels at $1.98 to just above $2.20 a share. Any high-volume move above those levels will then give AMCF a chance to tag its 52-week high at $2.75 a share.
Traders can look to buy AMCF off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $1.29 or at $1.15 a share. One can also buy AMCF 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.
YRC Worldwide
One under-$10 trucking player that's starting to trend within range of triggering a big breakout trade is YRC Worldwide (YRCW), which, through its subsidiaries, provides various transportation services primarily in North America.. This stock has been hit hard by the bears over the last three months, with shares off sharply by 50%.
If you take a look at the chart for YRC Worldwide, you'll notice that this stock has been downtrending badly for the last five months, with shares plunging lower from its high of $33.89 to its recent low of $7.06 a share. During that downtrend, shares of YRCW have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of YRCW have now started to stabilize and the stock has formed a triple bottom chart pattern over the last month, at $7.06, $7.20 and $7.44 a share. Shares of YRCW have now reversed its downtrend and started to uptrend, with the stock moving higher from $7.06 to its recent high of $10.50 a share. That move has now pushed shares of YRCW within range of triggering a big breakout trade.
Traders should now look for long-biased trades in YRCW if it manages to break out above some near-term overhead resistance levels at $10.63 a share to its 50-day moving average of $10.87 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 volume of 826,789 shares. If that breakout triggers soon, then YRCW will set up to re-test or possibly take out its next major overhead resistance levels $12.38 to $15 a share. Any high-volume move above $15 will then give YRCW a chance to tag $16 to $18 a share.
Traders can look to buy YRCW off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $9.20 or at $8.35 a share. One can also buy YRCW 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.
Vivus
Another under-$10 biopharmaceutical player that look ready to trigger a tradable breakout is Vivus (VVUS), which is engaged in the development and commercialization of therapeutic products for large underserved markets, including obesity and related morbidities, such as sleep apnea and diabetes and men's sexual health. This stock has been hammered by the bears so far in 2013, with shares off by 26%.
If you take a look at the chart for Vivus you'll notice that this stock recently formed a double bottom chart pattern at $9.30 to $9.33 a share. Shares of VVUS have now started to spike higher of $9.33 a share and back above its 50-day moving average of $9.73 a share. That move is quickly pushing shares of VVUS within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in VVUS if it manages to break out above some near-term overhead resistance at $10.29 a share high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 2.35 million shares. If that breakout hits soon, then VVUS will set up to re-test or possibly take out its next major overhead resistance levels at $11.44 to $11.64 a share, or its 200-day moving average at $11.76 a share. Any high-volume move above those levels will then give VVUS a chance to tag its next major overhead resistance level at $13 a share.
Traders can look to buy VVUS off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $9.33 to $9.30 a share, or just blow $9 a share. One can also buy VVUS 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.
Meru Networks
One final under-$10 stock that's starting to trend within range of triggering a big breakout trade is Meru Networks (MERU), which provides a virtualized wireless LAN solution that optimizes the enterprise network to deliver the performance and operational simplicity of a wired network, with the mobility. This stock has been on fire so far in 2013, with shares up sharply by 38%.
If you take a look at the chart for MERU Networks, you'll notice that this stock has been uptrending strong over the last month and change, with shares moving higher from its low of $2.93 to its intraday high of $3.70 a share. During that move, shares of MERU have been consistently making higher lows and higher highs, which is bullish technical price action. This move has now pushed shares of MERU within range of triggering a big breakout trade.
Traders should now look for long-biased trades in MERU if it manages to break out above some near-term overhead resistance levels at $3.85 to $3.87 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 149,941 shares. If that breakout hits soon, then MERU will set up to re-test or possibly take out its 200-day moving average at $4.24 a share. Any high-volume move above that level will then give MERU a chance for an explosive move higher back towards its next major overhead resistance levels at $4.80 to $5.20 a share.
Traders can look to buy MERU off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $3.35 a share, or below more near-term support at $3.20 a share. One can also buy MERU 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.
To see more hot under-$10 equities, check out the Stocks Under $10 Setting Up to Explode portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
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