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
( DEXO), soaring close to 20%;
, ripping over 30%;
, adding around 16%; and
up over 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 for 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 sitting right around some key
is wind energy player
. This stock has been crushed by the sellers so far in 2011, with shares off by over 70%.
If you take a look at the chart for Broadwind Energy, you'll notice that this stock has been uptrending for the past two months, after it hit a low at 26 cents in early October to its recent high of 76.8 cents. The stock has now pulled back towards some near-term support at 60 cents, so if it can hold that support, traders should watch for a big breakout in the near future.
Market players should look for a sustained move and close above 77 cents to 87 cents a share on high volume. A
above those levels should set this stock up to spike huge and potentially register 50% or more in gains. I say this because the next resistance levels are at the 200-day
of $1.09 and some more prior resistance at $1.47 a share. This means the upside is big if the breakout does trigger, since resistance sits so far way.
You could be a buyer of this stock off any weakness and anticipate the breakout. I would simply use a stop right around 60 cents in case the stock isn't ready to take off just yet. You could also buy off strength and get long once 77 cents is taken out, and then add once 87 cents is breached. Look for volume on any future breakout that registers close to or above its three-month average action of 1.56 million shares.
Another under-$10 stock that's just starting to break out is solar panel maker
, a manufacturer of silicon ingots, photovoltaic cells and PV modules. This is another stock that's been destroyed by the sellers in 2011, with shares off by over 80%.
If you take a look at the chart for Hanwha Solarone, you'll notice that this stock has been downtrending big for the last six months, with shares consistently making lower highs and lower lows. During that timeframe, the stock has failed to trade above either of its key 50-day or 200-day moving averages. That said, the stock has started to find some buying support near $1.12 a share, and now it's even starting to break out above some near-term overhead resistance at $1.38 on decent volume. Volume on Wednesday registered 1.307 million (the stock closed up), which is well above its three-month average action of 901,400 shares.
Trades should now watch for this stock to close above $1.38 today on decent volume or to close near its daily highs on high volume. If we get that action, then look for this stock to set up for a run back toward its 50-day moving average of $1.98 or possibly even higher toward $2.50.
You could now be a buyer of this stock off any noticeable weakness with a stop just below the breakout level of $1.38. If this breakout is the real deal, then this stock has big upside potential since it's so beaten-down from its July high near $6.50 a share.
Beazer Homes USA
One name under-$10 name in the homebuilding complex that's worth monitoring here is
Beazer Homes USA
, which designs, sells and builds single-family and multi-family homes. This is yet another stock that the sellers have done a number on, since shares are off by over 50% so far in 2011.
If you take a look at the chart for Beazer Homes USA, you'll notice that this stock has been uptrending for the last two months, with shares making mostly higher highs and higher lows. Anytime you see price action like this on any chart, it should be considered very bullish. It demonstrates that large traders are paying up to own shares each time the stock dips. This strong uptrend now sets up BZH for a big breakout if it can manage to clear some overhead resistance levels in the near future.
Traders should watch for BZH to trigger a breakout trade if the stock can manage to sustain a high-volume move and close above $2.43 a share. Look for volume on any breakout that registers close to or above its three-month average action of 2.3 million shares. If we get that breakout to trigger, then look for BZH to spike huge back toward its 200-day moving average of $3.09 or possibly much higher toward its next significant overhead resistance level at $3.68 a share.
You could be a buyer of this stock off any noticeable weakness and simply use a mental stop a few percentage points below your entry point. You could also buy off strength and get long once the stock sustains a move and close above $2.43 on high volume. I would use a mental stop a few percentage points below the $2.43 if you buy off strength. I would add to any long position then once the 200-day is taken out with volume.
One final under-$10 stock that's starting to trigger a breakout trade today is
( GMXR), a pure-play independent oil and natural gas exploration and production company. This stock has been a big winner for the short-sellers in 2011, with shares off by around 70%.
If you take a look at the chart for GMX Resources, you'll notice that this stock has plunged from its July high near $5.36 to a recent low of $1.15 a share. After printing that low, the stock has started to rebound sharply and is now starting to break out on
. At last check, the stock is soaring 19% with over 2.4 million shares traded. That volume is well above its three-month average action of 1.53 million shares.
Traders should now watch GMXR to sustain a breakout and close above $1.50 to $1.56 on high volume. The volume is already there, so just watch the close today to see if GMXR finishes near its daily highs and above $1.56. This
today bodes well for much higher prices for this stock in the coming days or weeks. The next major breakout levels sit at $1.73 and then its 200-day moving average of $1.98 a share.
You could be a buyer of this stock off any noticeable weakness and simply use a mental stop at around $1.50 in case the breakout fails. One could also just buy strength and get long once $1.73 is taken out to the upside with high-volume. Use a mental stop a few percentage points below that level if you buy off strength. I would then add to any long positions once GMXR moves back above its 200-day at $1.98 with volume. Target a run back towards its next significant overhead resistance level at $2.62 if the buyers continue to step up.
One more under-$10 stock that's starting to trigger a breakout trade today is
, which develops and markets semiconductor solutions. This stock has been crushed by the bears in 2011, with shares off by over 58%. If you take a look at the chart for QuickLogic, you'll notice that this stock recently found some big buying support at $2.11 to $2.15 a share. After buyers stepped in to own shares at those levels, the stock has started to soar and has now triggered a big breakout above some overhead resistance levels. Those key levels the stock has now started to move some near-term overhead resistance at $2.39 and its 50-day
of $2.44 a share.
Traders should now watch for QUIK to sustain a move and close above $2.44 on high volume. Volume today has already registered 245,000 shares, which is well above its three-month average volume of 197,300 shares, so watch for a close on the stock above $2.44 to trigger a bullish trade. At last check, the stock is trading at $2.66, which is only a few cents off its daily high of $2.74. If we get that strong close with volume, then this stock has a great chance to trade back towards its 200-day moving average of $3.27 or possibly much higher.
You could be a buyer of this stock off any noticeable weakness and simply use a mental stop just below the 50-day at $2.44. I would then add to any long positions once QUIK moves back above its 200-day at $3.27 with volume. Target a run back toward its next significant overhead resistance level at $4.64 if the 200-day is taken out with volume in the coming days or weeks.
To see more hot under-$10 stocks like
Asset Acceptance Capital
( AACC) and
( ALTH), 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.