The 9 Strongest Single-Digit Stocks

My database shows an increasing number of strong stocks trading under $10.

Is this hit-or-miss group finally awakening from the dead after its strong run in 2003 and early 2004?

It's certainly possible, with broad buying pressure lifting the major averages to multiyear highs.

In any case, it's a great time to examine these equity bargains and turnaround tales.

Let's look at the top 10 single-digit stocks.

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Avi BioPharma (AVII - commentary - Cramer's Take) boasts a variety of cardiac and antiviral drugs in its pipeline. The stock has doubled since jumping off its 2005 low in September. It looks like this rally will continue until price reaches 2003 resistance at $7.48. But I wouldn't chase a long position here. Instead, wait for a slow pullback to $4 or below.

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Homestore (HOMS - commentary - Cramer's Take) provides online technology to the real estate industry. It surged above its 2003 high at $5.95 last week and stalled out. It could consolidate here or drop back to trendline support at $5.50. The stock shows very strong accumulation and could reach five-year resistance in the mid-teens before running out of gas.

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eDiets.com (DIET - commentary - Cramer's Take) offers online nutritional services. The stock doubled in price in the last six weeks and is quickly approaching 2004 resistance at $9.55. Weight-control stocks can be very strong in January as overeaters resolve to live healthier lifestyles. But seasonality is winding down for this speculative sector, so I'd avoid this one for now.

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24/7 Real Media (TFSM - commentary - Cramer's Take) is a small player in the online advertising industry. It was a powerhouse performer last year, rising 300% between May and December. But the stock is now rising into major resistance between $10 and $12. Fast-fingered traders can play a rally into this level, but the rest of us should look elsewhere for low-priced bargains.

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LivePerson (LPSN - commentary - Cramer's Take) provides online support tools. It filled out a 16-month basing pattern and broke out last September. That strong rally is now approaching key resistance from high-water marks in late 2003 and early 2004. This could stall progress and trigger a decline back to $3.50. So this is another single-digit stock to avoid at the present time.

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Chronic underperformer JSDU (JDSU - commentary - Cramer's Take) doesn't look too bad right now. The stock jumped off a multiyear low last May and is rising slowly toward respectable levels. Unfortunately, accumulation is weaker than for most other stocks on today's list. So make sure to take profits if and when price approaches solid resistance near $5.

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Bema Gold (BGO - commentary - Cramer's Take) is a small-scale metals play. Price is now pushing into two-year resistance, after a strong run off the May 2005 low. The two-year old highs should stall progress just above current levels and may trigger a deep pullback. But this stock eventually will hit new highs, unless the powerful gold rally fizzles out.

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Broadwing (BWNG - commentary - Cramer's Take) provides Internet bandwidth services. The stock broke out to a 52-week high last week, after rising over November resistance at $7.25. The steep angle of attack suggests price will pull back soon to consolidate its gains. That decline could offer a buying opportunity for a rally up to 2004 resistance just below the "whole number" $10.

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Asyst Technologies (ASYT - commentary - Cramer's Take) is a semiconductor equipment company that completed a 17-month base under $6 last November. It rallied to $6.53, pulled back to test new support and ran to a new high last week. The long-term pattern shows little resistance from current levels into $10, so this could be an excellent single-digit turnaround play in 2006.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider Avi BioPharma, eDiets.com, LivePerson and Asyst Technologies to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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As originally published, this story contained an error. Please see Corrections and Clarifications.

Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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