One under-$10 stock that's setting up to trend significantly higher is Gevo (GEVO - Get Report), a renewable chemicals and advanced biofuels company. This stock is down big so far in 2011, with shares off by over 60%.
If you take a look at the chart for Gevo, you'll see that this stock has dropped big from its July high of $18.75 to a recent low of $5.18 a share. Since hitting that low, the stock has started to rebound nicely and it has found some buying support between $5.18 and $5.35 a share. The upside volume was very strong off the news Thursday with 713,000 shares traded, which is well above its three-month average of 99,000 shares.Traders should now watch Gevo for a breakout trade if this stock can manage to sustain a high-volume move and close above its 50-day moving average of $7.07. Look for volume on any move above the 50-day that registers close to or above 99,000 shares. If we get that move, then this stock should setup to challenge its next significant overhead resistance levels at $8 to $10 a share in the near-term. You could be a buyer of Gevo off any weakness and simply place a stop just below either $5.35 or $5.18 a share. You could also buy off strength and get long once the 50-day is taken out with volume. I would use a stop just below the 50-day if get long off strength. It's worth noting that this is a heavily shorted stock with around 17% of the tradable float currently sold short by the bears. Look for the potential of a short-squeeze to develop if GEVO can get back above its 50-day with volume in the near future.