New Departments in Tech Five & Dime

On Aug. 22, I screened tech stocks that were trading between $1 and $3. On Sept. 6, I opened the Tech Stocks Five & Dime. Then on Sept. 7, I screened for the best stocks trading between $3 and $5. Now I want to continue this theme by screening stocks that trade for less than $10 by technology industry.

Today, I'd like to open two new departments of the Tech Stock Five & Dime, the office and communications equipment area and the computer manufacturers and electronic devices section. And if you'd like to suggest another segment of low-priced tech stocks for me to screen, please email me.

I will add other technology industries to the Tech Five & Dime such as computer-related, semiconductors and software to round out all the shelves within the entire tech sector, which is my area of expertise. To qualify to be in the aisles of the Tech Five & Dime, a stock must be at least 30% undervalued according to my model. Then I look at each stock's weekly chart profile to make sure that none were overly negative. For those with a negative technical profile, I advise buying on weakness to the value level I included for each stock on the shelf. Keep in mind that all stocks profiled are extremely risky and thus investments are speculative.

Office and Communications Equipment

The stocks I have chosen in the office and communications equipment industries are generally involved with wireline and wireless connectivity to networks. These are growth areas in the next wave of the Internet, which focuses on broadband applications.

Ditech Communications(DITC) designs telecom equipment that enhances voice and sound quality over wireline, wireless and satellite networks. The stock is 36.5% undervalued and has a neutral weekly chart profile. Its five-week modified moving average is at $7.30. Ditech Communication is cheap enough to buy, but there is risk to my monthly value level at $5.07, where investors will want to dollar-cost average on weakness. A weekly close above $7.30 would signal a turnaround, with the 200-week simple moving average at $9.58.

Even more undervalued is Tellabs(TLAB), which designs communications equipment for telecom service providers, at 40.0% undervalued. Its weekly chart profile will shift to positive on a close this week above its five-week modified moving average at $9.08. The upside is enhanced if the close this week is also above my monthly pivot at $9.63. This would create the momentum for shares to trade back above the $10 threshold, and get the attention of equity fund managers.

But the first place for most undervalued in this group goes to Tut Systems(TUTS), which is a whopping 75% undervalued. The company designs digital-video processing systems to enable telephony-based service providers to broadcast digital-video signals over their networks. It has a negative weekly chart profile, but if the zone of the five-week modified moving average at $3.22 and 200-week simple moving average at $2.91 holds, the stock should have the potential to rise all the way to my quarterly pivot at $3.56.