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TheStreet Open House

5 Stocks Under $10 Set to Soar

Zynga  

One under-$10 stock that's trading within range of triggering a near-term breakout trade is Zynga (ZNGA), which develops, markets and operates online social games as live services played over the Internet and on social networking sites and mobile platforms. This stock has been destroyed by the sellers so far in 2012, with shares down a whopping 63%.

If you take a look at the chart for Zynga, you'll see that this stock has been stuck in a nasty downtrend for the last six months, with shares plunging from over $14.48 to its recent low of $2.66 a share. During that downtrend, shares of Zynga consistently made lower highs and lower lows, which is bearish technical price action. That said, for the past few weeks ZNGA has held that $2.66 low and it's started trending sideways from $3.12 to $2.80 a share. That sideways trading pattern is now setting up ZNGA for a possible move into its gap down zone from late July that started near $5 a share.

>>3 Internet Stocks Ready to Move Higher

Traders should now look for long-biased trades in ZNGA as long as its trending above Wednesday's low of $3.05 a share, and above its gap down day high of $3.22 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 23.4 million shares. Volume on Wednesday registered a whopping 39.53 million shares, and the stock closed at $3.26 a share. This means that ZNGA has already started to move into the gap, so an explosive move higher could be in the cards. If ZNGA can hold its trend above $3.05 to $3.22 a share, then this stock could easily spike back towards $5 to $6 a share soon.

Traders can now look to buy ZNGA off any weakness as long as it holds $3.05 a share, or you could give it more room to around $2.80 a share. One could also buy off strength once we get a weekly close above $3.22 a share. Either way, any high-volume move into that previous gap will raise the probability for a large spike higher.

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