WINDERMERE, Fla. (Stockpickr) -- There isn't a day that goes by on Wall Street that certain 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 in the under-$10 complex from Wednesday, including
Renewable Energy Group
, which ripped higher by 27%;
, which soared by 19.5%;
, which trended up 19.4%; and
Alliance Healthcare Services
, which closed up 18.2%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
One low-priced stock that I flagged recently that went on to explode higher was
. On last Friday, I highlighted SVNT in "
5 Stocks Poised for Breakouts
" at around 77 cents. I liked the way SVNT was setting up to take out some overhead resistance levels, and I liked the way the upside volume was expanding dramatically.
Guess what happened? Shares of SVNT did trigger that breakout with heavy volume, and the stock went on to run from 75 cents to its recent high of $1.10 a share. Shares of SVNT still look bullish, and traders should now look for more upside if it can manage to clear $1.10 with high volume. A move over $1.10 could send SVNT toward its
of $1.73 a share.
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
. I also like to find under-$10 names with a catalyst, but that's secondary to the chart and volume patterns.
With that in mind, here's a look at
One under-$10 stock in the biotechnology and drugs complex that's trading within range of
, which engages in the manufacture and supply of biologic products used to manufacture biologic drugs. This stock is off to a hot start in 2012, with shares up over 37% so far.
If you take a look at the chart for Repligen, you'll see that this stock gapped down huge back in late April from over $7 to under $5 a share with
. Following that gap down, shares of RGEN went on to trend lower and hit a recent low of $3.72 a share. During that slide, shares of RGEN were consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has now formed a double bottom at $3.72 to $3.78 a share, and it's starting to make higher highs. This could be signaling a bullish trend change for RGEN.
Traders should now look for long-biased trades in RGEN if it can manage to trigger a near-term breakout trade above $4.82 to $4.90 a share, and then above $5.14 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 195,062 shares. If that breakout triggers soon, then RGEN will have a great chance of re-filling some of that previous gap down from over $7 a share.
Traders should use some near-term support levels for RGEN at around $4.50 to its 50-day moving average of $4.27 a share, as possible stops if you buy off weakness. One could also just get long RGEN off strength once it clears those breakout levels with volume, and then simply use a stop just under $4.50 a share. Any high-volume move over $5.14 should be what sets RGEN off to the upside.
Magnum Hunter Resources
Another under-$10 stock that looks poised for higher prices is
Magnum Hunter Resources
, an independent oil and gas company engaged in the exploration for and the exploitation, acquisition, development and production of crude oil, natural gas and natural gas liquids, primarily in the states of West Virginia, Ohio, Texas, Kentucky and North Dakota and in Saskatchewan, Canada. This stock is off to a slow start in 2012, with shares down by over 18%.
If you take a look at the chart for Magnum Hunter Resources, you'll notice that back in early May, this stock plunged from $6.45 to its June low of $3.55 a share with heavy volume. During that slide lower, shares of MHR were consistently making lower highs and lower lows, which is bearish technical price action. After hitting that $3.55 low, shares of MHR went on to enter a range bound trend, with shares moving between $3.42 on the downside and $4.48 on the upside. A move outside of that range will now likely setup the next major trend for MHR.
Traders should now look for long-biased trades in MHR if this stock can manage to break out above some near-term
at $4.37 to $4.48 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 1.4 million shares. If that breakout triggers soon, then look for MHR to re-test and possibly take out its 200-day
of $5.15 a share. If that 200-day gets taken out with volume, then MHR could re-test that May high of $6.45 a share.Traders can look to buy MHR off weakness and simply use a stop that sits close to its 50-day moving average of $3.91 a share. One could also buy off strength once MHR takes out those resistance levels, and then simply use a stop at around $4.20 to $4.06 a share.
One under-$10 name in the electronic instruments and controls complex that looks attractive at current levels is
, a provider of stored electrical energy solutions and a manufacturer and supplier of lead-acid batteries for transportation and industrial applications worldwide. This stock is off to a decent start in 2012, with shares up over 18% so far.
This company was hit with some bullish news this morning, after it announced that
(PBY) has awarded it with a contract to be the majority supplier for their stores in the U.S. and Puerto Rico. Under this contract, Exide will provide automotive, marine, lawn and garden, and heavy duty commercial batteries to Pep Boys.
If you take a look at the chart for Exide Technologies, you'll see that this stock recently sold off from $3.77 to around $2.50 a share. During that selloff, shares of XIDE were making mostly lower highs and lower lows, which is bearish technical price action. That said, the stock rebounded strong off of that $2.50 low with monster upside volume. That rebound has now pushed XIDE back above both its 200-day and 50-day moving averages, and it's quickly pushing the stock into breakout territory.
Traders should now look for long-biased trades in XIDE if it can manage to hold a trend above its 200-day moving average at $2.96 a share, and if it can sustain a move or close above some near-term overhead resistance at $3.15 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average volume of 731,478 shares as bullish. At last check, shares of XIDE have hit an intraday high of $3.18 and volume is around 235,000 shares traded.
Traders can look to buy XIDE off weakness and simply use a stop that sits just below its 200-day moving average of $2.96 a share. One could also go long once XIDE clears $3.15 a share with high volume, and then simply use the same stop, or a tighter stop near today's low of $3.05 a share.
Another under-$10 name in the biotechnology and drugs complex that looks ready to trigger a major breakout trade is
, a pharmaceutical company focused on the research, development and commercialization of products for the acute treatment of central nervous system conditions. This stock has been hammered by the bears so far in 2012, with shares down by over 50%.
If you take a look at the chart for Alexza Pharmaceuticals, you'll see that this stock sold off hard recently from $4.99 to a low of around $2.90 a share. During that slide lower, shares of ALXA were consistently making lower highs and lower lows, which is bearish technical price action. Once ALXA found some support near $2.90 a share, the buyers stepped in with huge volume and the stock saw a one-day spike that took it to $4.30 a share. Now shares of ALXA are trending within range of triggering another major
Traders should look for long-biased trades in ALXA if it can manage to trigger a breakout above some near-term overhead resistance at $4.30 a share, and then above $4.87 to $4.99 a share with high volume. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 356,088 shares. If that breakout triggers soon, then ALXA will have a great chance of filling some of its previous gap down from May that started at $7.60 a share.
Traders can look to get long ALXA off weakness, and simply use a stop right around its 50-day moving average of $3.57 a share. Once could also get long once it takes out $4.30 a share with decent volume, and then simply use a stop near today's low of $3.86 a share. Keep in mind that once ALXA movers over $4.30 it will break out above a key downtrend line, so the move to the upside could be very powerful if we get it with volume.
One more under-$10 stock that could be setting up for higher prices is
, a development-stage, specialty pharmaceutical and medical device company, focused on oncology, initially cancers in the liver. This stock has been hammered by the sellers, with shares down by over 37% so far in 2012.
This company recently announced that it has submitted a new drug application to the FDA seeking approval for its proprietary chemosaturation system for use with melphalan hydrochloride in the treatment of patients with unresectable metastatic melanoma in the liver.
If you take a look at the chart for Delcath Systems, you'll see that this stock was downtrending badly until June, with shares constantly making lower highs and lower lows, which is bearish technical price action. After ending that downtrend, shares of DCTH went on to form a triple bottom at $1.40 to $1.42 a share. Now the stock has started to form higher lows and trend back above its 50-day moving average of $1.73 a share. This move is quickly pushing DCTH within range of clearing a key downtrend line and breaking out.
Traders should now look for long-biased trades in DCTH once it manages to trigger a breakout trade above some near-term overhead resistance levels at $2.13 to $2.24 a share, and then above more resistance at $2.43 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 1,258,870 shares. If that breakout triggers soon, then DCTH has a great chance of trading well north of $3 a share.
Traders can now look to buy DCTH off weakness and simply anticipate that breakout. I would simply use a stop if you buy off weakness that sits just below its 50-day moving average of $1.73 a share, or even around some key near-term support at $1.61 a share. If you get long of weakness, then add to the position once DCTH takes out some of those overhead resistance levels with high volume.
To see more hot under-$10 equities, 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.
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.