WINDERMERE, Fla. (Stockpickr) -- There isn't a day that goes by on Wall Street when 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 today in the under-$10 arena, including
, ripping higher by over 50%;
, soaring over 30%;
Smith Micro Software
, adding over 15%; and
, up over 14%. 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.
2012 Stock Predictions and Outlook
Here's a look at a number of
Sirius XM Radio
One under-$10 stock that's getting very close to triggering a
Sirius XM Radio
, which is engaged in broadcasting music, sports, news, talk, entertainment, traffic and weather channels in the U.S. on a subscription fee basis through its two satellite radio systems. During the last six months, this stock is down by around 7%.
If you take a look at the chart for Sirius XM Radio, you'll notice that this stock recently moved back above its 200-day moving average of $1.89 a share with volume. The stock also broke out recently above some past overhead resistance at $1.92 to $1.95 a share with volume.
Traders should now watch SIRI for a near-term breakout trade if this stock can manage to sustain a high-volume move and close above $2.06 a share. Look for volume on a move and close above $2.06 that's near or well above its three-month average action of 53.7 million shares. If we get that action, then this stock should setup to re-test its next significant overhead resistance levels at $2.22 to $2.35 in the near future.
If you're bullish on SIRI, then one could be a buyer off any weakness and simply use a mental stop that's just below its 200-day moving average of $1.89 a share. You could also buy off strength and get long once it closes over $2.06 with volume.
It's worth noting that this stock has a decent short interest since 8% of the tradable float currently sold short by the bears. Since this stock has struggled for months to trade above $1.92 to $1.95 a share, this new found strength could be a precursor to a large short-squeeze in the coming days or weeks.
Sirius shows up on recent lists of
OCZ Technology Group
Another under-$10 stock that's quickly approaching a big breakout is
OCZ Technology Group
, a provider of high performance solid state drives and memory modules for computing devices and systems. This stock is off by around 17% over the last six months.
If you take a look at the chart for OCZ Technology Group, you'll see that despite the 17% drop over the last six months, shares of OCZ have actually been trending very strong since it bottomed in October at $4.14 a share. Since that bottom, this stock has been making higher lows and it just closed back above both its 50-day and 200-day
, which is bullish price action. Shares of OCZ are now setting up to trigger a big breakout trade, and
Traders should now watch OCZ for a sustained high-volume move and close above $7.99 a share to trigger a near-term breakout. Look for volume that's tracking in close to or above its three-month average volume of 1.5 million shares. At last check, volume has already passed that level today, and volume has been tracking in very strong on the up days for the past six trading sessions.
One could get long OCZ on a close with volume above $7.99 a share or you could buy it off weakness and anticipate the breakout with a mental stop just below $7 a share. If we get the breakout soon, look for OCZ to re-test its next significant overhead resistance level at $8.75 a share. I would then add to any long positions if OCZ takes out $8.75 with high volume. If we see $8.75 taken out with volume, then this stock has a great chance or re-testing $10.94 a share in the near future.
This is one of the most heavily shorted stocks in the market with 44.5% of the tradable float currently sold short by the bears. Any near-term breakout for OCZ could set this stock up for a monster short-squeeze, so make sure to keep this name on your trading radar. In fact, the stock shows up on a recent list of
One name under-$10 name in the food processing complex that could be setting up for a big spike higher is
, an integrated wholesale coffee roaster and dealer in the U.S. This stock has been hammered during the last six months, with shares off by over 65%.
If you take a look at the chart for Coffee Holding, you'll notice that this stock is very close to
if it can manage to take out some key technical levels soon. Those key technical levels are its 50-day moving average of $8.97 and some near-term overhead
at $9.15 a share. This stock has failed to trade above its 50-day moving average for more than a day or two for the past six months, so a move above it now should be considered very bullish.
Market players should now watch JVA for a sustained
and close above $8.97 and $9.15 a share to trigger a major breakout trade. Look for volume that registers near or above its three-month average action of 714,848 shares. If we get that action soon, then look for JVA to re-test $10.65 to $11.70 (its 200-day) in the near future.
You could be a buyer of JVA off strength and get long once it manages to close above its 50-day moving average of $8.97 with volume. I would simply use a mental stop that's a few percentage points below that level in case the move fails. I would then add aggressively to any long positions once the stock takes out $9.15 with high-volume.
This is another name with an extremely high short interest, since 26.9% of the tradable float is currently sold short by the bears. Due to this high short interest, a high-volume move over the 50-day could easily spark a massive short-squeeze that spikes JVA significantly higher.
Human Genome Sciences
One name in the biotechnology and drugs sector that looks ready for a big breakout is
Human Genome Sciences
( HGSI) whose products include Benlysta (belimumab) for systemic lupus erythematosus and raxibacumab for inhalation anthrax. The bears have hammered this stock during the past six months, with shares off by over 65%.
If you take a look at the chart for Human Genome Sciences, you'll notice that this stock plunged massively from its October high of $15.07 to its recent low of $6.51 a share. After printing that low, the stock has started to rebound and make higher lows, which is bullish price action. Now the stock is nearing a big breakout if it can manage to clear some near-term overhead resistance levels.
Traders should watch HGSI for a breakout trade if the stock can manage to sustain a high-volume move and close above $7.65 and $7.85 a share. Look for volume that's near or above its three-month average action of 6,166,384 shares. At last check, volume has registered over 6 million shares and HGSI has hit a daily high of $8.41 a share. I would consider it bullish if HGSI can close today at least above $7.85, or even better closer to its daily high.
One could be a buyer of HGSI off any strength where the stock closes above $7.85 and its 50-day
of $8.07 a share. If we get that action, then look for HGSI to take out $8.41 with decent volume. Some potential targets on the upside are $10 to $11 a share or much higher if the volume really starts to kick in.
This stock also has a decent short interest since 10.6% of the tradable float is currently sold short by the bears. Any lose back above the 50-day and above $8.41 should set off a decent short-squeeze, so keep this name on your trading radar.
One more under-$10 stock that traders should put on their trading radar is
( GNOM), a life sciences company that has developed and commercialized a DNA sequencing platform. This stock has been annihilated by the bears during the last six months, with shares off by over 70%.
If you take a look at the chart for Complete Genomics, you'll notice that this stock has plunged from its August high of over $11 to its recent low of $2.57 a share. Since hitting that low, the stock has started to rebound sharply to its current price of around $4 a share. This rebound now has the stock close to triggering a bullish trade if the stock can manage to close a key technical level with volume.
Market players should now watch GNOM to trigger a bullish setup if the stock can sustain a high-volume move and close above its 50-day moving average of $3.83 a share. Look for volume that's tracking in close to or above its three-month average action of 368,467 shares. At last check, volume today has already hit over 500,000 shares, with the stock up over 7% at $4. If we see a close over $3.83 today and near the daily highs, then this stock could be setting up to trend back towards $4.68 to $5.60 a share or possibly even higher.
You could be a buyer of this stock off any weakness and simply use a mental stop that's a few percentage points below $3.83 a share in case this move fails. I would then add to any long positions if GNOM takes out $4.68 with high-volume.
Once again this is another stock with a notable short interest since 8% of the tradable float is currently sold short by the bears. Any high-volume close over the 50-day could easily set this stock up for a big spike higher due to the stock's low float of 17.55 million shares and decent short interest.
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.
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.