 |
|
|
|
|
||||||||||||||||||||||||||||||||||||||
  RSS FEEDS |
Let's look at low-priced stocks that are popping up on my trading screens right now. These inexpensive issues are benefiting from truckloads of capital, as market players seek out the next big thing. Just keep in mind that rallies on most cheap stocks are destined to fail because they're already bargain-basement priced for good reason.
It's also true that the majority of small stocks aren't profitable and don't have a lot of money in the bank. So, keep your stop-losses tight when taking on exposure because these issues can drop hard and fast on bad news, like poor data from junior biotechs or secondary offerings that dilute publicly held shares.
Fortunately, the rewards these stocks offer to small traders and investors can be just as dramatic. In fact, you may find single-digit plays more profitable and addictive than you ever imagined. So, now might be a perfect time to get away from the blue-chip grind and get these five low-priced stocks onto your radar.
Onstream Media (ONSM - commentary - Cramer's Take) hit a bubble high near $700 before plunging back to earth during the bear market. It bottomed out at 46 cents last October and began a quiet recovery. This move has picked up steam in recent weeks, with the stock now trading just under $3.50. Solid buying pressure suggests this one will get bid higher in coming weeks. My interest began when the stock dropped into a triangle pattern in late December, with resistance just below $4. It tested this level two weeks ago and then pulled back to a developing trend line. It looks like the next uptick might push price above this level and start a rally that could reach $7.
Sangamo Biosciences (SGMO - commentary - Cramer's Take) dropped from $51 to $1.21 when the bubble burst, bottoming out with the broad market in late 2002. It bounced to a recovery high at $8.37 in early 2004 and then sold off again. The stock returned to this level in both June and November 2006, but was turned away each time. It rallied back for the fourth time earlier this month. This price action completes a broad cup-and-handle base that should yield higher prices in coming months. However, round number resistance at $10 stands as a firm barrier during the initial phase of any breakout, so it could take time for upside momentum to develop. Interested parties should keep that in mind if they want exposure in this junior biotech.
Gray Television (GTN - commentary - Cramer's Take) fell from $15.72 to $5.15 in a long decline that ended last June. The stock has been on the recovery trail since that time, rising off the low in a steady recovery marked by solid accumulation. The last rally leg brought the stock up to $9 in late January, where price stalled and dropped into a sideways pattern for three weeks. However, the stock perked up last Friday and broke above the bullish consolidation. This sets the stage for a rally up and though $10. Price faces another series of obstacles after mounting that barrier and heading toward the midteens. This suggests that timely profits be taken when price approaches key resistance between $11.50 and $13.
Halozyme Therapeutics (HTI - commentary - Cramer's Take) differs from other stocks highlighted today because it's trading near its all-time high rather than recovering from a long decline. The medical application company burst higher on heavy volume in December following the announcement of a favorable distribution agreement with Roche. That rally topped out at $8.70, and price dropped into a triangle pattern for two months before breaking out almost two weeks ago. Notice how the move stalled at the parallel channel formed by triangle support. This sets up a buyable pullback near the 20-day simple moving average at $8.35. Look for the next move to carry the stock well over $10.
Kodiak Oil & Gas (KOG - commentary - Cramer's Take) rallied to its historic high at $4.60 last June and dropped into a broad triangle pattern. It tested resistance three times before breaking out last week. The stock closed over $5 for the first time in Monday's session. A good chunk of the big rally off the last swing at $4.35 will likely be retraced before the stock moves much higher. The rally doesn't offer low-risk entry right now, but price should move higher over time, so watch for a pullback to support. Reward targeting is simple with these types of patterns: extend the support line over the swing high, and channel resistance marks the target. In this case, the line predicts the move will reach $6 before it hits major resistance. Please note that due to factors including low market capitalization and/or insufficient public float, we consider Onstream Media, Sangamo Biosciences, Gray Television and Kodiak Oil and Gas 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.
At the time of publication, Farley was long Gray Television, although holdings can change at any time. 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.
Brokerage Partners
|
|||||||||||||||||||||||||||||||||||||||||
| Subscribe to our RSS Feed |
© 1996- TheStreet.com, Inc. All rights reserved. |
PODCASTS
