5 Stocks Under $10 With Big Upside Potential

Oncothyreon

Another under-$10 name in the biotechnology and drugs complex that looks interesting is Oncothyreon (ONTY), which is focused primarily on the development of therapeutic products for the treatment of cancer. This stock has been on absolute fire this year with shares up by over 120%.

If you take a look at the chart for Oncothyreon, you'll see that this stock plunged from its July high of $11.59 to a recent low of $5.67. After printing that low, the stock formed a sideways trading pattern between $5.63 and $7.75. That sideways pattern has been in place since early August, but now the stock is close to triggering a breakout trade on a move outside of the sideways pattern. On Wednesday, the stock also soared back above its 50-day moving average of $6.54 on huge volume, which is bullish.

That move was mostly due to a note from Wedbush, which boosted its price target from $15 to $31 a share ahead of the STIMUVAX phase III data set for the first quarter of 2012. What's impressive about the stock's performance on Thursday is that the volume continued to expand and the stock added another 5%. Volume was over 2 million on Wednesday and 1.5 million on Thursday, well above its three-month average action of 507,800 shares.

Market players should now watch for a major breakout to trigger for ONTY if it can clear some past overhead resistance at $7.54 to $7.75 on high volume. A high-volume move above those levels could easily set this stock up for a ridiculous spike higher.

This stock is heavily shorted with over 21.2% of the float currently sold short by the bears. (It shows up on an October list of the 10 Most-Shorted Stocks in Biotech.) If we do get that breakout soon, then it's possible this stock makes a run at its 52-week high of $11.59, or possibly even higher.

You could be a buyer of this stock off any weakness and anticipate the breakout over $7.54 to $7.75 a share. I would simply use a mental stop right around the 50-day moving average of $6.54. You could also just buy off strength once the stock does trigger that breakout and simply use a much tighter mental stop near $7 a share.

Oncothyreon was also one of 13 Biotech Stocks Bought and Sold by Hedge Funds in the most recently reported quarter.

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