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 complex, including
, ripping higher by over 30%;
, soaring over 15%;
, surging over 10%; and
trading up over 10%. 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 starting to challenge some major breakout levels is biotech player
, which specializes in infectious diseases. This stock is off to a red hot start in 2012, with shares up over 28% so far on the year. (I also featured it recently in "
If you take a look at the chart for SIGA Technologies, you'll notice that this stock has been uptrending strong since it hit a
in October at $1.78 a share. During that uptrend, shares of SIGA have been consistently making higher lows and higher highs, which is bullish price action. Now the stock is setting up to potentially trigger a big breakout and trend significantly higher from current levels.
Market players should put SIGA on their trading radar for a long biased trade if the stock takes out some near-term overhead
at $3.26 and then $3.58 with heavy volume. Look for volume that hits near or above its three-month average action of 548,924 shares. At last check, volume today has already eclipsed that amount and the stock has hit a high of $3.32. That puts SIGA within range of challenging $3.58 in the coming days or weeks, so watch the volume if that level gets taken out.
You could be a buyer of SIGA off any weakness and simply use a mental stop right around $3 a share. That $3 level is near-term support, so using a stop right below that would be a smart move. I would add to any long positions initiated off of weakness once the stock takes out $3.58 with volume. Target a big spike if we get that breakout back towards $5.36 to $5.90 a share or possibly much higher.
Keep in mind that SIGA is heavily shorted since its current short interest as a percentage of the float is 20%. That ultra high short interest could be the fuel that ignites a
once $3.58 a share is taken out with volume.
Another under-$10 biotech player that's trading very close to triggering a major breakout is
, a biodefense company engaged in the development and commercialization of medical countermeasures against biological and chemical weapons. This stock is off to a modest start in 2012, with shares up just 5.5%.
If you take a look at the chart for PharmAthene, you'll notice that this stock was hammered lower by the sellers from its last September high of $3.35 to a recent low of $1.07 a share. Since taping that bottom at $1.07, this stock has started to uptrend strong, making higher lows and higher highs. That strong uptrend has now pushed PIP back above its 50-day
of $1.26 a share, and now the stock is moving close to
Traders should now watch PIP for a sustained
or close above $1.44 and $1.49 a share to trigger a big breakout. Look for volume that registers near or well above its three-month average action of 426,010 shares. If we get that action soon, then watch for PIP to make a run at $1.60 to $2 a share, or potentially much higher.
One could now be a buyer of PIP off any noticeable weakness and simply use a mental stop just below some near-term support at $1.26 (its 50-day) or $1.20 a share. If you buy off weakness, then I would add to any long positions once PIP breaks out above $1.44 to $1.49 with volume.
Make note that PIP has a high short interest since over 13% of the tradable float is currently sold short by the bears. This large short interest, combined with the current uptrending chart pattern, gives PIP a great chance to squeeze significantly higher if the breakout gets triggered soon.
Another name under-$10 name in the biotechnology and drugs complex that looks poised for much higher prices is
. Raptor's product portfolio includes both candidates from its drug targeting platforms and in-licensed and acquired product candidates. This stock is off to a decent start in 2012 with shares up over 6.5% so far.
If you take a look at the chart for Raptor Pharmaceutical, you'll see that this stock has been uptrending very strong since it marked a recent bottom at $3.66 a share last August. During that uptrend, RPTP has been consistently making higher lows and higher highs, which is bullish price action. Whenever any stock shows a pattern like this, it demonstrates that large institutional traders are paying up to own the stock whenever it dips.
Market players should now watch RPTP for a
trigger above $6.44 and then $7.06 on high-volume. At last check, RPTP has already taken out that overhead resistance level of $6.44 today and the volume on this move is very strong. Over 865,000 shares have traded so far, which is well above the three-month average volume of 435,653 shares.
Traders should now look for long biased trades in RPTP since the first breakout level over $6.44 a share has hit. One could be a buyer off any future weakness and simply use a mental stop right below some near-term support at $6.25 or down to $6 if you want to give it more room. I would then add aggressively to any long positions if $7.06 is taken out with volume. A high-volume move over $7.06 could lead to huge spike higher in this stock.
Shares of RPTP sport a decent short interest since over 9% of the tradable float is currently sold short by the bears. The short-sellers have also been increasing their bets from the last reporting period by 5.4%, or by about 234,000 shares. Those short-sellers will not be feeling very comfortable if RPTP takes out $7.06 soon, so look to squeeze them if that level is breached with volume.
MEMC Electronic Materials
Another under-$10 stock that's very close to triggering a big breakout is
MEMC Electronic Materials
, which is engaged in the development, manufacture and sale of silicon wafers. This stock is off to a smoking hot start in 2012 with shares up over 20% so far.
If you take a look at the chart for MEMC Electronic Materials, you'll notice that this stock has decimated by the bears from last September when it traded over $7 to its recent low of $3.65 a share hit in December. Since printing that low, the stock found some big buying support at around $3.65 to $3.77 a share, and it has crossed back above its 50-day
of $4.21. That move has now put WFR in focus for a breakout trade if the stock can manage to clear some near-term overhead resistance levels.
If you're bullish on WFR, you could be a buyer of this stock once it takes out $4.94 to $5 a share with big volume. Look for volume that's tracking in close to or above its three-month average action of 8.29 million shares. At last check, the stock tapped $5 a share today, but so far volume is well under 8.29 million shares. Traders should now watch WFR for a sustained high-volume move and close over $5. If that move hits soon, then I would target a run back towards $6.50 to $6.91 (its 200-day) a share, or possibly much higher.
Shares of WFR sport a decent short interest, since 6.4% of the tradable float is sold short. The short-sellers have been increasing their bets from the last reporting period by 9.4%, or by about 1.24 million shares. Those new shorts could get forced to cover quickly if WFR takes out $5, so keep this name on your trading radar.
WFR shows up on a list of the
, as well as a list of
An under-$10 name in the electronics and controls complex that could be gearing up to spike higher is
, a provider of stored electrical energy solutions, and is a manufacturer and supplier of lead-acid batteries for transportation and industrial applications worldwide. This stock is making longs very happy so far in 2012 since shares are up over 30% so far.
If you take a look at the chart for Exide Technologies, you'll notice that this stock gapped down big last November from around $4.50 to under $3 a share. The stock then went on to print a new
at $2.22 a share. After hitting that low, the stock reversed from a downtrend to an uptrend with shares now making higher lows and higher highs. This recent uptrend in XIDE has now pushed the stock into breakout territory since it has cleared some near-term overhead
at $3.27 to $3.32 a share.
If you're bullish on XIDE, then you could be a buyer of this stock on a sustained high-volume move or close above $3.32 and then $3.60 a share. At last check, XIDE has already taken out $3.32 so watch for a move or close over $3.60 either today or in the near future. That $3.60 level is important because it sits right around the gap down day high. Once $3.60 is taken out with high-volume, then XIDE can start to fill some of that gap back towards $4.50 a share. Look for volume that's near or well above its three-month average action of 1.14 million shares.
This is yet another name with a decent short interest, since the bears are short 7% of the tradable float on XIDE. Those shorts are going to get nervous once XIDE moves back that gap down day high, so the short-squeeze potential her is high if we clear $3.60 with volume.
To see more hot under-$10 stocks, including
, 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.