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5 Stocks Under $10 With Big Upside Potential

China Shen Zhou Mining & Resources

One under-$10 stock that's starting to look interesting is China-based rare earth metals player China Shen Zhou Mining Resources (SHZ - Get Report). The sellers have crushed this stock in 2011, with shares off by over 70%.

If you take a look at the chart for China Shen Zhou Mining & Resources, you'll see that this stock has been uptrending since it hit its October low of 97 cents. During that uptrend, the stock has been making higher lows and higher highs, which is bullish price action. Market players should now monitor SHZ for a breakout trade if it can manage to clear some overhead resistance at $2.64 to $2.73 a share on high volume.

>>6 Stocks at New Highs Triggering Breakouts

The stock managed to move above $2.64 on Thursday and hit an intraday high of $2.73 a share, before pulling back and finishing the day down 4.49% to $2.34. The volume Thursday was high with 962,500 shares traded, whichh is well above the three-month average of 274,300.

This action is telling me the stock wants to pull back more in the short term but that traders should still keep an eye on those breakout levels for when the pullback is over. What's key here is that the stock doesn't trade back below the 50-day moving average of $1.88 on high volume off any drop. As long as the 50-day remains intact, then I still like this setup.

You could be a buyer of this stock off any high-volume move and close above $2.64 to 2.73 a share. I would simply use a mental stop a few percentage points below those breakout levels if you buy off of strength. You could also buy this name off weakness as long as $1.88 isn't violated to the downside. I would target a spike towards $3 to $3.50 (its 200-day) a share, or even higher if a high-volume breakout triggers soon for SHZ.

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SHZ $0.10 0.00%
SCEI $0.29 -3.33%
CYTR $3.35 -4.56%
IDIX $24.50 0.20%
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