Northern Dynasty Minerals
One more under-$10 name that could be gearing up for a breakout trade is Northern Dynasty Minerals (NAK), a mineral exploration company, which holds indirect interests in 627 square miles of mineral claims in southwest Alaska. This stock has pretty much done nothing so far in 2012, with shares virtually flat.
If you take a look at the chart for Northern Dynasty Mineral, you'll notice that this stock has been downtrending since its February high of $8.19 towards its current price of around $6 a share. During that move lower, this stock has consistently made lower highs and lower lows, which is bearish technical price action. That said, the stock recently stopped its downtrend and started to trade sideways between $5.70 and $6.20 a share. A move outside of that sideways range should and above $6.20 will now trigger a breakout trade for NAK.
Traders should now look for long-biased trades in NAK if it can manage to take out some near-term overhead resistance at $6.20 a share high-volume volume. Look for volume on that move that registers near or well above its three-month average action of 181,419 shares. At last check, volume on Thursday was around 52,000 shares and the stock has hit a daily high so far of $6.14, but since pulled back to around $6 a share. A sustained high-volume move and close over $6.20 should set this stock up for a run towards its 50-day moving average of $6.73 a share or possibly much higher into the mid-7s.If you buy NAK off weakness, then use the low end of the recent trading range at $5.70 a share as a reference point for a mental stop. That said, the probability for a large move higher will increase notably if we can get a high-volume move and close over $6.20 a share. Buying off of strength might be the better play since the stock is so close to coming out of its recent downtrend. To see more hot under-$10 stocks, check out the Stocks Under-$10 Setting Up To Trade Higher portfolio on Stockpickr. -- Written by Roberto Pedone in Winderemere, Fla.
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