This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

New Semi Picks in the Tech Five & Dime

Guidelines for Price Levels

Low-priced stocks, those trading for less than $10, are particularly attractive to individual investors because it's easier to establish a large position in these stocks with less capital. But before you invest in any of the stocks that fall into any of the four categories I've outlined, please consider the amount of risk you can tolerate, and be aware that all of the stocks in these groups should be considered speculative.

Be aware that my model indicates that it's most prudent to add to positions at a value level and to book profits on strength to a risky level. For example, a trader who buys at a value level should consider selling at the nearest pivot.

Options on Survival: This group includes stocks trading in the $1-to-$3 range. Stocks in this category are option plays on the company's survival. Buy them only if you can afford to lose 100% of the investment, because stocks become worthless at bankruptcy, which is a high risk for companies with stocks in this price range.

Margin Threshold Stocks: Stocks in this group trade for less than $5 but more than $3. Many brokerage firms will not allow their clients to buy stocks trading for less than $5 on margin. Keep in mind that these stocks trade below $5 for a reason; like their Options on Survival kin, their companies are at risk for bankruptcy. However, unlike members of that lower-priced group, stocks that trade between $3 and $5 have a better chance of survival.

Five & Dimers: This class of stocks, those that trade between $5 and $10, tends to stay in that range. Many mutual fund managers, by their fund guidelines, can't own stocks trading below that upper level. If there is a reason for a stock to fall below $10, expect to see selling pressure from the mutual fund managers. Once the selling subsides, and if the stock stays above $5, some speculation is merited in stocks that still have positive profiles. I believe a good strategy for members of this group is to buy tech stocks trading for less than $10, but to keep a sell-stop in case the stock breaks below $5. Stocks from the Five & Dime should be considered speculative. But they can be rewarding if you find the ones that can get back above $10 before they break below $5. A positive chart profile is a good indicator for stocks trading in this range.

Stocks Below $1: Often called penny stocks, stocks that have drifted down from higher levels to become members of this group become subject to delisting. I will not comment on these, or on stocks trading on the bulletin boards or Pink Sheets because they are so volatile, illiquid or hard to research, if not all three.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CNXT $44.46 3.88%
AMCC $5.08 -0.39%
CIEN $19.16 -0.78%
EMKR $5.47 0.55%
JDSU $13.02 -0.76%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs