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TheStreet Open House

5 Stocks Under $10 Set to Soar

Stocks in this article: ISR GALE PIP ECYT LXRX

Endocyte

Another under-$10 name in the biotechnology and drugs complex that looks ready to trigger a major breakout trade is Endocyte (ECYT - Get Report), which is engaged in developing therapies for the treatment of cancer and inflammatory diseases. This stock is off to a red-hot start in 2012, with shares up over 110%.

If you take a look at the chart for Endocyte, you'll notice that this stock has been uptrending very strong since mid-May, with shares soaring from around $6.07 a share to a recent high of $8.55 a share. During that solid uptrend, shares of Endocyte have been making mostly higher lows and higher highs, which is bullish technical price action. Over the last few weeks, shares of Endocyte have been moving sideways between $7.75 a share and $8.55 a share. That sideways action is now setting up ECYT for a near-term breakout trade if the stock can manage to clear the upper-end of its recent range.

>>4 Drug Stocks Facing FDA Approval Decision

Market players should now look for long-biased trades in ECYT if it can manage to trigger a break out above some near-term overhead resistance at $8.55 to $8.57 a share with high-volume. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 819,995 shares. If we get that move soon, then this stock could explode to the upside and trend back towards its next major overhead resistance levels at $11.11 to $11.63 a share, or possibly even $12.65 to $13.50 a share.

If you like the setup here for ECYT, then one could buy this stock off any weakness and simply use a stop just below $7.86 to $7.75 a share, or even right below its 50-day moving average of $7.18 a share. If you get long off weakness, then I would add aggressively once $8.55 to $8.57 is taken out with volume. You could also just buy off strength once $8.55 to $8.57 are cleared with volume, and simply use a stop a few percentage points below that level ,or just below $7.86 a share.

The short-sellers are circling around this stock, since the current short interest as a percentage of the float for ECYT is very high at 13.4%. The bears have also been increasing their bets from the last reporting period by 25.9%, or by about 657,000 shares. The bears will not be happy to see ECYT trigger that breakout soon, so look for them to cover and push it sharply higher if it triggers soon.

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