One final under-$10 stock that looks ready to trigger a major breakout trade is RadioShack ( RSH), which is involved in the retail sale of consumer electronics goods and services through its RadioShack store chain. This stock has been red hot so far in 2013, with shares up a whopping 72%.
If you take a look at the chart for RadioShack, you'll notice that this stock recently formed a double bottom chart pattern at around $3.03 to $2.97 a share. Following that bottom, shares of RSH have ripped higher back above its 50-day moving average at $3.28 a share and it broke out above some near-term overhead resistance levels at $3.33 to $3.34 a share. That move is now quickly pushing shares of RSH within range of triggering an even bigger breakout trade.
Traders should now look for long-biased trades in RSH if it manages to break out above some key overhead resistance levels at $3.87 to $4.17 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 2.38 million shares. If that breakout triggers soon, then RSH will set up to re-test or possibly take out its next major overhead resistance levels at $5 to $6 a share.Traders can look to buy RSH off weakness to anticipate that breakout and simply use a stop that sits just below its 50-day at $3.28 a share, or right below $3 a share. One can also buy off strength once RSH clears those breakout levels with volume and then simply use a stop right below $3.40 to $3.30 a share. This stock is a favorite target of the bears, since the current short interest as a percentage of the float for RSH is extremely high at 36.1%. If RSH triggers that breakout soon, then this stock has explosive upside potential due to this high short interest. We could easily get a monster short-squeeze, so be ready to play the breakout if it triggers for shares of RSH. 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 Madison, Wis.
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