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.
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Just take a look at some of the hot movers in the under-$10 complex from Thursday, including Alimera Sciences (ALIM), which is skyrocketing higher by over 60%; pSivida (PSDV), which is soaring higher by over 40%; Oxygen Biotherapeutics (OXBT), which is ripping higher by over 30%; and Astrotech (ASTC), which is spiking higher by over 20%. 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 exploded higher was trucking player YRC Worldwide (YRCW), which I highlighted in Dec. 12's "5 Stocks Under $10 Set to Soar" at $9.70 per share. I mentioned in that piece that shares of YRC Worldwide had been downtrending badly for the last five months, with shares plunging lower from $33.89 to $7.06 a share. Shares of YRCW had recently formed a triple bottom chart pattern over the last month, at $7.06, $7.20 and $7.44 a share. The stock had started to reverse its downtrend and enter a new uptrend since forming that triple bottom, with shares moving higher from $7.06 to $10.50 a share. That move was starting to push shares of YRCW within range of triggering a big breakout trade above some near-term overhead resistance levels at $10.63 to its 50-day moving average of $10.87 a share.
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Guess what happened? Shares of YRC Worldwide did not wait long to trigger that breakout, since the stock exploded higher on Dec. 13 with monster upside volume. This stock tag an intraday high on that day of $12.81 a share, which is a monster move. Shares of YRCW were far from done with its uptrend, since this stock has continued to run higher with shares hitting an intraday high on December 18 of $15.24 as share. That represents a monster gain of close to 60% since I flagged this setup at $9.70 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.
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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.
Quantum Fuel Systems Technologies Worldwide
One under-$10 alternative energy player that's starting to move within range of triggering a major breakout trade is Quantum Fuel Systems Technologies (QTWW), which designs, develops and produces compressed natural gas storage tanks and packaged fuel systems and other advanced fuel and propulsion systems for alternative fuel vehicle applications. This stock has been on fire so far in 2013, with shares up large by 1545.
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If you take a look at the chart for Quantum Fuel Systems Technologies, you'll notice that this stock has pulled back from its high of $7.64 to its recent low of $5.85 a share. That low corresponded with the stock's 50-day moving average, and shares managed to hold right above that key technical level. Shares of QTWW have now started to find buying interest as the stock has soared higher from $5.85 to its intraday high of $7.11 a share. That move is quickly pushing shares of QTWW within range of triggering a major breakout trade.
Traders should now look for long-biased trades in QTWW if it manages to break out above some near-term overhead resistance levels at $7.43 to its 52-week high at $7.64 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 808,597 shares. If that breakout triggers soon, then QTWW will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $9 to $10 a share.
Traders can look to buy QTWW off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $5.93 a share. One can also buy QTWW 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.
China TechFaith Wireless Comm Tech
Another under-$10 wireless telecom player that's starting to move within range of triggering a big breakout trade is China TechFaith Wireless Comm Tech (CNTF), which is a China-based original developed product provider focused on the original design and development of handsets and sales of finished products to its local and international customers. This stock has been performing modestly strong so far in 2013, with shares up 19.8%.
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If you take a look at the chart for China TechFaith Wireless Comm Tech, you'll notice that this stock has been trending sideways over the last two months, with shares moving between $1.28 on the downside and $1.60 on the upside. Shares of CNTF have just started to spike higher back above its 50-day moving average of $1.46 a share with above-average volume. Volume so far on Thursday has registered over 304,000 shares versus its three-month average action of 293,475 shares. That move is quickly pushing shares of CNTF within range of triggering a big breakout trade.
Market players should now look for long-biased trades in CNTF if it manages to break out above some near-term overhead resistance levels at $1.54 to $1.60 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 293,475 shares. If that breakout hits soon, then CNTF will set up to re-test or possibly take out its next major overhead resistance levels at $1.80 to its 52-week high at $2.08 a share. Any high-volume move above its 52-week high at $2.08 a share will then give CNTF a chance to re-fill some of its previous gap down zone from February of 2012 that started at $2.25 a share. If that gap gets filled with strong volume, then CNTF could easily tag $2.50 to $2.70 a share.
Traders can look to buy CNTF off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $1.40 or at $1.32 a share. One can also buy CNTF 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.
Venaxis
One under-$10 bio therapeutic drugs player that's starting to trend within range of triggering a major breakout trade is Venaxis (APPY), which advances products that address unmet human diagnostic needs. This stock has been on fire over the last six months, with shares soaring higher by 59%.
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If you take a look at the chart for Venaxis, you'll notice that this stock has been uptrending strong for the last few weeks after it touched its 200-day moving average, with shares moving higher from its low of $1.71 to its intraday high of $2.15 a share. During that uptrend, shares of APPY have been consistently making higher lows and higher highs, which is bullish technical price action. This stock has now started to break out on Thursday above some key overhead resistance levels at $2.03 to $2.09 a share with strong volume. That move is quickly pushing shares of APPY within range of triggering another major breakout trade.
Traders should now look for long-biased trades in APPY if it manages to break out above some near-term overhead resistance at $2.20 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 541,564 shares. If that breakout triggers soon, then APPY will set up to re-test or possibly take out its next major overhead resistance levels at $2.70 to its 52-week high at $2.99 a share. Any high-volume move above those levels will then give APPY a chance to tag its next major overhead resistance levels at $3.18 to $3.50 a share.
Traders can look to buy APPY off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $1.82 a share. One can also buy APPY off strength once it starts to clear $2.20 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.
GTx
Another under-$10 biopharmaceutical player that looks ready to trigger a major breakout trade is GTx (GTXI), which is dedicated to the discovery, development and commercialization of small molecules that selectively target hormone pathways to treat cancer, osteoporosis and bone loss, muscle loss and other serious medical condition. This stock has been destroyed by the bears so far in 2013, with shares off sharply by 62%.
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If you take a look at the chart for GTx you'll notice that this stock has trending sideways inside of a long consolidation chart pattern for the last two months and change, with shares moving between $1.41 on the downside and $1.97 on the upside. This stock recently formed a double bottom chart pattern at $1.41 to $1.42 a share. Shares of GTXI have now started to spike higher off those support levels and the stock is closing in on its 50-day moving average of $1.62 a share. That move is quickly pushing shares of GTXI within range of triggering a major breakout trade.
Market players should now look for long-biased trades in GTXI if it manages to break out above its 50-day moving average of $1.62 a share, and then once it takes out more near-term overhead resistance levels at $1.73 to $1.97 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 716,033 shares. If that breakout hits soon, then GTXI will set up to re-test or possibly take out its next major overhead resistance level at $2.36 a share. Any high-volume move above $2.36 will then give GTXI a chance to re-fill some of its previous gap down zone from August that started just above $4 a share.
Traders can look to buy GTXI off weakness to anticipate that breakout and simply use a stop that sits right below those double bottom support levels at $1.42 to $1.41 a share. One can also buy GTXI 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.
Ariad Pharmaceuticals
One final under-$10 biopharmaceuticals player that's quickly moving within range of triggering a major breakout trade is Ariad Pharmaceuticals (ARIA), which is engaged in the discovery and development of breakthrough medicines to treat cancers by regulating cell signaling with small molecules. This stock has been hammered by the sellers so far in 2013, with shares off huge by 73%.
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If you take a look at the chart for Ariad Pharmaceuticals, you'll notice that this stock just formed a double bottom chart pattern at $3.80 to $3.83 a share. Following that bottom, shares of ARIA have spiked sharply higher back above its 50-day moving average of $3.63 a share. Shares of ARIA have also started to break out above some near-term overhead resistance at $4.85 a share with strong upside volume. That move is quickly pushing shares of ARIA within range of triggering another major breakout trade.
Traders should now look for long-biased trades in ARIA if it manages to break out above some near-term overhead resistance levels at $5.62 to its gap down day high of $6.10 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 19.95 million shares. If that breakout hits soon, then ARIA will set up to re-fill some of its previous gap down zone from October that started above $18 a share. Some possible upside targets if ARIA gets into that gap with volume are $8 to $10 a share.
Traders can look to buy ARIA off weakness to anticipate that breakout and simply use a stop that sits right below $4 a share. One can also buy ARIA 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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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.
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