An earlier version of this story provided an incorrect company description for Tanzanian Royalty. We apologize for the error.
WINDERMERE, Fla. (
) -- There isn't a day that goes by on Wall Street where stocks trading near or under $10 a share don't experience massive spikes higher. Traders savvy enough to follow the low-priced names and trade them with discipline and sound risk management are banking ridiculous coin on a regular basis.
Just take a look at some of the hot movers on Thursday in the under-$10 complex, including
, which closed up a whopping 18%;
, which finished up 18%;
, which ended up 18%; and
Smith & Wesson
, which soared to close over 11% (and which I featured yesterday in "
"). You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
I'm not as eager to recommend investing long term in stocks that trade less than $10 a share because these names can be very speculative, and the odds for picking the long-term winners aren't great. But I definitely love to
stocks that are priced below $10. I like to view them as a trading vehicle with lots of volatility and lots of upside when the trade is timed right.
When I trade under-$10 names, I do it almost entirely based off of the charts and technical analysis. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.
Here 's a look at a number of
One under-$10 stock that's just starting to trigger a
, a biopharmaceutical company focused on the development and commercialization of therapies that harness biological pathways and deliver value to patients and clinicians in the fields of neurology and gastroenterology. This stock is off to a monster start in 2012 with shares up over 42%.
If you take a look at the chart for Repligen, you'll see that this stock has been uptrending very strong for the past four months. This strong uptrend started right after the stock broke out above some past overhead resistance at $3.58 to $3.72 a share on monster volume. Following that breakout, the stock soared towards its current price of just under $5 a share. This strong move has now pushed RGEN within range of triggering another major breakout.
Market players should now watch RGEN for a breakout trade if this stock can manage to take out some near-term overhead resistance at $4.92 to $5.12 with high volume. A sustained
and close over those levels should set this stock up to re-test its next significant overhead resistance level at $5.36 a share. Look for volume on a move above $4.92 to $5.36 that registers near or well above its three-month average action of 43,237 shares. If we get that action soon, then RGEN has a great chance to trend higher toward $6 to $7 a share in the very near future.
I would consider looking for long-biased trades in RGEN as long as it's trending above $4.92 to $5.36 a share with strong upside volume flows. I would simply avoid this stock from the long side if it fails to trend above those levels and drops back below some near-term support at $4.65 with volume.
Another under-$10 stock that's moving within range of triggering a breakout trade is
. This company provides life insurance and annuity products through third-party distributors, supported by wholesalers and financial planning specialists employed by it. This stock is up nicely so far in 2012, with shares registering a 33% gain.
If you take a look at the chart for Phoenix Companies, you'll notice that this stock has been uptrending strong for the past six months, soaring from its low in October at 97 cents per share to its recent high of $2.69 a share. This stock recently pulled back off that $2.69 high and tagged its 200-day moving of $1.91 a share, where buyers stepped back into the stock. Now PNX has moved back above its 50-day
of $2.16, and it's trading within range of triggering some near-term breakouts.
Traders should look for long-biased trades in PNX if this stock can manage to break out above some near-term overhead resistance at $2.34 to $2.69 a share with high volume. Look for volume on that move that's near or well above its three-month average action of 553,631 shares. If we get that action soon, then look for PNX to make a run at its next major overhead resistance level of $2.86 a share. A high-volume move above $2.86 will then set this stock up to make a large run back towards its 2010 high near $4 a share.
Market players should look for long biased trades in PNX as long as it's trending above its 50-day moving average of $2.15 and above those key breakout levels of $2.34 to $2.86 with strong upside volume flows. I would avoid this name from the long side if PNX is tending below those levels and below its 200-day moving average of $1.91 a share.
Camelot Information Systems
An under-$10 name in the software and programming complex that's trading within range of a big breakout is
Camelot Information Systems
, a domestic provider of enterprise application services and financial industry information technology services in China. This stock is up modestly so far in 2012, with shares up around 7.7%.
If you take a look at the chart for Camelot Information Systems, you'll notice that this stock has been trading inside of a sideways trading pattern for the past few months between $2 and $3.15 a share. Shares of CIS recently broke out above $3.15 and ran toward a high of $3.48 a share, before pulling back to its current price of $3.07 a share. It's also worth pointing out that the move over $3.15 that took the stock to $3.48 came with monster upside volume.
Traders should now look for long-biased trades in CIS if the stock can manage to break out above some significant overhead resistance levels at $3.48 to $3.84 a share with heavy volume. Look for volume on move above those levels that's near or above its three-month average action of 317,700 shares. If we get that action soon, then I really like the upside potential for CIS because its next significant overhead resistance levels sit far away at $5.24 to $6.85 a share.
Traders should consider long biased trades in CIS as long as it's trending above $3.15 to $3.48 with strong upside volume flows. I would simply avoid any long trades in CIS if this stock is trending below its 50-day moving average of $2.57 with strong volume. Keep in mind that CIS reports earnings before the market opens on Friday. That earnings call should provide us with some quick clarity as to if CIS is ready to make a run at those key breakout levels.
An under-$10 name in the biotechnology and drugs complex that's quickly approaching a big breakout trade is
, a biopharmaceutical company focused on the acquisition, development and commercialization of pharmaceutical products for the treatment of cancer and renal disease. This is one of the hottest stocks so far in 2012 with shares up over 88%.
If you take a look at the chart for Keryx Biopharmaceuticals, you'll that this stock has been solidly in a monster uptrend since it bottomed in December at $2.27 a share. Since tagging that bottom, the stock has soared and consistently made higher lows and higher highs, which is bullish price action. That move has now pushed KERX within range of triggering a major near-term breakout trade.
Traders should now look for long biased trades in KERX if this stock can manage to break out above some near-term overhead resistance levels at $4.80 to $5.12 a share with high-volume. Look for volume on that move that's near or well above its three-month average action of 2,078,550 shares. At last check, volume on Thursday registered over 4.14 million shares and the stock hit a daily high of $4.94 before closing at $4.78 a share. A sustained high-volume move and close above $4.80 to $5.12 should set this stock up for some sizable upside.
Traders should look for long-biased trades as long as KERX is trending above $5.12 with strong upside volume flows. If we get that action soon, then look for KERX to quickly re-test its next significant overhead resistance levels at $5.55 to $5.91 a share. Then any high-volume move above $5.91 will put even more key overhead resistance at $6.67 a share into play, so you can see that there's some big upside here if these breakouts trigger soon.
This stock sports an extremely large short interest as a percentage of its float at 16.5%. That means a monster short-squeeze could easily get setoff if some of those breakout levels are taken out soon with volume. That said, I would avoid long trades in KERX if the stock is trending below $4.80 with strong downside volume flows.
Kervyx shows up on recent a list of the
Tanzanian Royalty Exploration
Another under-$10 stock that could be ready to breakout and head much higher is
Tanzanian Royalty Exploration
, a mineral resource company with exploration-stage properties that engages in the acquisition of interests in and the exploration of natural resource properties. This is another big time performer so far in 2012 with shares up over 100%.
If you take a look at the chart for Tanzanian Royalty Exploration, you'll notice that this stock has uptrended huge after it formed a double bottom back in December at around $2.20 a share. Since forming that bottom, the stock has marched higher consistently making higher lows and higher highs as it ripped towards its current price of just over $4.80 a share. That strong upside move now puts TRX within range of triggering a near-term major breakout trade.
Traders should now look for long-biased trades in TRX if this stock can manage to take out some near-term overhead resistance at $4.85 a share with heavy volume. Look for volume on that move that registers near or well above its three-month average volume of 775,213 shares. At last check, volume on Thursday registered over 1.21 million shares and the stock hit a daily high of $4.85 before closing at $4.81.
Traders should now watch for a sustained high-volume move and close above $4.85 to signal that this stock wants to trend much higher. If we get that action soon, then look for TRX to trade back towards $6 a share or much higher since there's little overhead resistance between $4.85 and those levels.
Keep in mind that the current short interest as a percentage of the float for TRX is 5.6%. The bears have also added to their short positions from the last reporting period by 11.1%, or by about 514,000 shares. The bears could be pressing their bets at the worst time since TRX is so close to triggering a breakout trade. Make sure to keep TRX on your breakout trading radar for the coming days and weeks.
To see more hot under-$10 stocks, check out the
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.
LRoberto 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.