WINDERMERE, Fla. (Stockpickr) -- 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 today in the under-$10 complex, including
Vasco Data Security
, ripping over 24%;
, adding over 25%;
, soaring over 25%; and
adding close to 20%. 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 under-$10 stocks
Fortress Investment Group
One under-$10 stock that's setting up to trend higher is global investment manager
Fortress Investment Group
. This stock has taken it on the chip so far in 2011, with shares off by over 32% but is now starting to shape up technically to potentially move significantly higher.
If you take a look at the chart for Fortress, you'll notice that the stock took a beating from close to $7 a share in early 2011 to a recent low of $2.67 a share. After printing that low, the stock has rebounded sharply and started to
with solid volume. This stock has just started to trade above some past overhead
at $3.74 to $3.80 a share. Two recent up days saw volume of 1.36 and 2.3 million shares traded, which is close to or well above its three-month average volume of 1.55 million.
Market players should now watch this stock for a sustained move and close above $3.80 a share on above average volume. If we see that action, then this stock should setup nicely to make a run back toward its 200-day moving average of $4.82 a share, or possibly even higher.
One could be a buyer of this stock off any weakness and simply use a mental stop at near the 50-day
of $3.28. If we don't see any significant weakness, then you could buy above $3.80 and simply use a mental stop a few percentage points below that level in case the breakout fails.
Another under-$10 name you should be watching right now is global information technology and consulting services company
. This stock has trended lower so far this year, with shares off by around 21%, but it is now setting up to trigger a key breakout.
If you take a look at the chart for Ciber, you'll notice that this stock gapped down big in August from around $5.34 to $2.71 a share on monster volume. After that huge gap down, the stock started to trade sideways between $2.70 and $3.50 a share. Shares of Ciber recently hit $3.88 and then pulled back to its 50-day moving average of $3.26, before bouncing again to its current level of around $3.67.
Market players should now watch for a breakout trade if this stock can manage trade and close above $3.88 a share and just over $4 on solid volume (gap down day high). A sustained high volume move above those levels should set this stock up for a monster run where it will start to fill that massive gap down from August.
You could be a buyer of this stock off any weakness and simply anticipate the breakout. I would use a mental stop near the 50-day moving average in case the stock isn't done going lower. A better way to play this would be to simply buy the breakout once it takes out $3.88 and let's say $4.10 with heavy volume. Look for volume that's tracking in close to or well above its three-month average volume of 704,400 shares.
One name under-$10 name in the technology complex that's ripping higher today is Korea-based semiconductor maker
. The bears have absolutely hammered this stock in 2011, with shares off by over 50%. That said, the stock is soaring today, with shares up over 13% as it approaches a big breakout off a solid earnings report.
If you take a look at the chart for MagnaChip, you'll notice that this stock has been destroyed by the sellers, after it fell from its June high of $14.45 to its recent low of $5.10 a share. After hitting that low, the stock has started to rebound sharply and move above some past overhead resistance at $6.79 a share on monster volume. Volume today has already registered over 445,500 shares which is well above its three-month average action of just 55,600 shares.
One could be a buyer of this stock on any weakness now that MX has stated to take out $6.79 and the volume is so strong. I would look to add aggressively to any long position once MX takes out its 50-day
of $7.56 with strong volume. Simply use a mental stop somewhere below $6.79 in case this breakout fails. I would target a run back towards $9 a share or possibly even higher if the bulls continue to step in and buy this stock.
Yingli Green Energy
If you're looking for an under-$10 name in the solar complex, then take a look at vertically integrated photovoltaic product maker
Yingli Green Energy
. This is another stock that the
in 2011, with shares off by over 55%. That huge decline has now setup a situation where the tock is approaching a big breakout that could trigger a sharp move higher.
If you take a look at the chart for Yingli Green Energy, you'll notice that this stock has plunged from its July high of $9.33 a share to a recent low of $2.75 a share. Since hitting that low in early October, the stock has rebounded and now trades at just over $4.20 a share. Traders should now watch this beaten-down name to trigger a big breakout if it can manage to move above its some past overhead resistance at $4.20 and $4.31 a share (its 50-day) on solid volume.
A sustained move and close above those levels should set this stock up for a monster move higher, possibly to $6.50 a share which is the next significant overhead resistance level. Traders should watch for volume on any breakout to track in close to or above its three-month average volume of 4.7 million shares.
You could be a buyer of this stock once it clears $4.20 to $4.31 a share with solid volume. If you get long off strength, I would then simply stop out if the stock trades back below the 50-day moving average by a few percentage points.
Another under-$10 stock that's setting up for a sharp move higher is Latin American social network and gaming platform
. Once again, this is another stock that has plunged in 2011, with shares off by a whopping 67%.
If you take a look at the chart for Quepasa, you'll notice that this stock has plunged from its July highs of $10.42 a share to its recent low of $2.74 a share. After hitting that low, the stock has started to see buyers come in at just under $3 a share, and the stock has now rebounded up towards its current price of $3.90 a share. Market players should now watch for a breakout trade to trigger for QPSA if the stock can manage to move above $3.84 and then $3.97 (its 50-day moving average) on strong volume. A sustained move and close above those levels should set this stock up to soar to $5.50 or possibly even higher.
You could be a buyer of this stock on any weakness and anticipate the breakout, or simply wait for the breakout and buy off strength. I would simply use a mental stop just below near-term support at $3.50 a share if you buy off weakness. If you enter off of strength, I would get long on the move above $3.97 with a mental stop a few percentage points below that level. Look for volume to track in close to or above its three-month average volume of 458,500 shares for confirmation that the breakout has legs.
Quepasa shows up on a recnet list of
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.