5 Stocks Under $10 Set to Soar

Lexicon Pharmaceuticals

One more under-$10 name that looks ready to trigger a big-time breakout trade is Lexicon Pharmaceuticals (LXRX). This is a biopharmaceutical company focused on the discovery and development of breakthrough treatments for human disease. This stock is off to a monster start in 2012, with shares up over 110%.

If you take a look at the chart for Lexicon Pharmaceuticals, you'll see that this stock has been uptrending extremely strong since it broke out in June above some past overhead resistance at $2.01 a share. Since triggering that breakout, shares of Lexicon Pharmaceuticals have skyrocketed to a recent high of $2.90 a share. During that uptrend, shares of LXRX have been making higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in LXRX if it can manage to trigger a near-term breakout trade above some overhead resistance levels at $2.78 to $2.90 with high volume. Look for a sustained move or close above those levels with volume that's near or above its three-month average action of 1,093,060 shares. If we get that action soon, then LXRX could explode north of $3 a share and possibly tag $4 a share rather rapidly.

One could be a buyer of LXRX off weakness to anticipate that breakout, and simply use a stop just below some near-term support at $2.54 to $2.30 a share. If you buy off weakness, then I would add to the position once $2.78 to $2.90 is taken out with volume. You could just also buy off strength and get long once this breaks out over $2.78 to $2.90 a share, and simply use a stop at around $2.54 or a big higher.

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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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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