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5 Under-$10 Stocks Poised for a Breakout

Synergy Pharmaceuticals

One final under-$10 name that's trending near a big breakout is Synergy Pharmaceuticals (SGYP). This is a development-stage biopharmaceutical company focused primarily on the development of drugs to treat gastrointestinal disorders and diseases. This stock is off to a strong start in 2012 with shares up over 25% so far.

If you take a look at the chart for Synergy Pharmaceuticals, you'll notice that the sellers creamed this stock recently, after shares plunged from $7.08 to under $4.50 a share with heavy volume. That move resulted in gap down after it had broken out above $4.50 and made that huge run to $7.08 a share.

Since that big gap lower, shares of Synergy Pharmaceuticals have been trending sideways for over a month between $4.13 and $4.95 a share. This sideways trend has resulted in very tight trading action, as this stock has coiled up right around both its 50-day at $4.48 and its 200-day at $4.40 a share.

Traders should now look for long-biased trades in SGYP if it can manage to trigger a near-term breakout trade above $4.75 to $4.95 a share with high volume. Look for a sustained move or close above those levels on volume that's near or above its three-month average action of 238,000 shares. If we get that action soon, then SGYP could potentially fill that previous gap down and tag $6 to $7 a share.

One could be a buyer of this stock off weakness and anticipate the breakout, and simply use a stop just below its 200-day moving average of $4.40 a share. Maybe use a stop at around $4.25 a share if you get long off weakness. You can also just wait for SGYP to take out $4.75 and then $4.95 with volume, and buy into that strength with a stop right around $4.60.

On Wednesday, over 1 million shares traded for SGYP as the stock closed up modestly. That big-time volume indicates that large traders could be snapping up SGYP here, so keep this on your breakout radar.

To see more hot under-$10 equities, check out the Stocks Under-$10 Setting Up to Explode portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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SYM TRADE IT LAST %CHG
BLDR $12.67 0.00%
BEAT $9.18 0.00%
INSM $24.03 0.00%
SGYP $9.28 0.00%
TPLM $4.60 0.00%

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