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TheStreet Open House

5 Under-$10 Stocks Showing Profit Potential

DragonWave Another under-$10 name that's trading very close to triggering a big breakout trade is DragonWave (DRWI), which is a producer of high-capacity packet microwave solutions which transmit voice, video, and data over broadband connections. This stock has been hammered by the sellers so far in 2012, with shares down by 32%.

If you take a look at the chart for DragonWave, you'll notice that this stock has been uptrending modestly for the last month, with shares moving higher from its low of $1.75 to its intraday high of $2.39 a share. During that uptrend, shares of DRWI have been mostly making higher lows and higher highs, which is bullish technical price action. This stock has also just started to bounce off its 50-day moving average of $2.21 today and it's quickly moving within range of triggering a big breakout trade.

Market players should now look for long-biased trades in DRWI once it manages to take out some near-term overhead resistance levels at $2.50 to $2.52 a share and then once it clears more overhead resistance at $2.72 to $2.91 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 210,234 shares. If that breakout triggers soon, then DRWI will set up to re-test or possibly take out its next significant overhead resistance levels at $3.20 to $4 a share.

Traders can look to buy DRWI off any weakness and then simply use a stop that sits right around some key near-term support at $1.92 a share. One could also buy DRWI off strength once it takes out those breakout levels with volume and then simply use a stop that sits right around its 50-day at $2.21 a share.

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