5 Stocks Under $10 Set to Explode Higher

Silicon Graphics

Another under-$10 stock that looks ready to trigger a sharp move higher is Silicon Graphics (SGI), a technical computing company that develops, markets and sells a range of computing servers and data storage, as well as differentiating software. This stock has been trending lower so far in 2012 with shares off by around 48%.

If you take a look at the chart for Silicon Graphics, you'll notice that this stock has been destroyed by the sellers with shares dropping from its February high of $14.93 to a recent low of $5.02 a share. That big move lower has now created an extremely oversold condition since shares of Silicon Graphics have been showing a relative strength index reading of below 30 for the past couple of weeks. Since this stock flashed some high-volume strength on Wednesday, shares of Silicon Graphics could be preparing to rebound sharply higher.

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On Wednesday, volume registered 1.38 million shares, which are well above its three-month average action of 805,462 shares, as the stock closed up 12% to $5.90 a share. That move is coming off a recent area of support at around $5.02 a share. I am calling this support because for the past few weeks SGI has held above that level as buyers stepped in to defend the stock.

Market players should now look for long-biased trades in SGI if it can manage to trigger a break out above some near-term overhead resistance at $6.33 a share with high-volume. That $6.33 area is the high on this stock for the day following a recent high-volume gap down from over $9 to under $6 a share. Look for volume off a sustained move or close above $6.33 that registers near or well above its three-month average action of 805,462 shares.

If we get that high-volume move above $6.33 a share, then SGI could easily spike big back towards its 50-day moving average of $8.49 a share, or possibly much higher into the $9 to $10 area. If you buy this stock off of weakness and anticipate the breakout, then I would use a stop just below $5.02 a share. If you buy off strength on a high-volume move over $6.33, then I would use my stop just below Wednesday's high of $6.07 a share.

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