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
Atlantic Coast Federal
, adding over 40%;
( DEAL), jumping higher by over 20%;
Universal Power Group
, ripping to the upside by 15%; and
up around 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.
Here's a look at a number of under-$10 stocks
One under-$10 stock that's quickly approaching some major breakout levels is multi-channel specialty retailer
. The sellers have hammered this stock lower in 2011 with shares off by over 60%.
If you take a look at the chart for Coldwater Creek, you'll notice that this stock dropped sharply from its September high of $1.83 to a recent low of $0.81 hit in late November. Following that low print, the stock has started to rebound big and print higher lows and higher highs, which is bullish price action. Now CWTR is approaching a major breakout if the stock can manage to take out some near-term overhead resistance levels with volume.
Traders should look for a sustained high-volume move and close above $1.14 to $1.20 a share, either today or in the coming days of weeks. A high-volume move above those levels should set this stock up for a retest of its 200-day moving average of $1.53 a share, or possibly much higher. Shares of CWTR are trending higher today by around 5.6% at $1.12 on heavy volume. Volume has already registered over 1.7 million shares, which is well above its three-month average action of 1.07 million shares.
One could be a buyer of this stock off any weakness and anticipate the breakout. I would simply use a mental stop just below its 50-day moving average of $1.02 in case the breakout never hits or fails. One could also buy off strength and get long once the range of $1.14 to $1.21 a share is taken out to the upside with volume. Look for volume on any future breakout that hits close to or above 1.07 million shares.
Another under-$10 stock that's nearing a major breakout is
. This company develops, acquires and commercializes treatments for cancer. This stock has had a rough go of it in 2011 with shares off by over 45%.
If you take a look at the chart for Cell Therapeutics, you'll see that this stock recently gapped down from over $1.30 a share to under $1.15 a share. After that gap down, the stock continued to trend lower and hit a recent low of $1.01 a share. That said, the stock is spiking up sharply today on big volume and is flirting with a move over its 50-day moving average of $1.14 a share. Often when a stock spikes back above its 50-day moving average with volume, it then experiences a much larger spike higher in the near future.
Market players should now watch for a breakout trade to trigger for CTIC if the stock can manage to sustain a high-volume move and close above some near-term overhead resistance at $1.20 a share. Volume so far today has already registered over 3.2 million shares, which is well above is three-month average action of 1.3 million shares. The stock has touched $1.17 a share today, so look for a close over $1.20 to signal that CTIC wants to refill some of that recent gap down.
One could be a buyer off strength and get long on a high-volume move over $1.20. I would simply use a mental stop just below today's low of $1.03 a share in case the breakout fails. You could also buy off any weakness today with the same mental stop. Target a run back toward $1.48 to $1.53 (200-day), or possibly much higher if the bulls jump into this name big in the coming days or weeks.
Keep in mind that CTIC is heavily shorted with around 12.5% of their tradable float currently sold short by the bears. Any move over $1.20 with volume should spark a decent short-squeeze.
One under-$10 name in the biotechnology and drugs complex that could be putting in a bottom here is
. This company designs, optimizes and develops novel drugs that block enzymes involved in cancer, viral infections and autoimmune diseases. This stock has taken it on the chin in 2011 with shares off by over 50%.
If you take a look at the chart for BioCryst Pharmaceuticals, you'll notice that this stock has dropped sharply from its October high of $3.33 to a recent low of $2.28 a share. That recent drop has taken the stock down to retest a previous support zone from back in August at around $2.30 a share. If BCRX can manage to hold up around these levels, it could easily be putting in a near-term bottom. This potential bottom could offer a decent risk-to-reward rebound trade since the stock has spiked a number of times up to $3.40 to $3.30, whenever its hit $2.40 to $2.30 in the past few months.
Once could be a buyer of this stock off any noticeable weakness and simply use a mental stop a few percentage points below that $2.30 a share. Look for confirmation of a bottom if we start to see some decent upside volume in the near future. Volume should be considered bullish if the stock is moving higher and it's tracking in close to or above its three-month average action of 162,783 shares. Volume so far today is at 93,000, which is a bit light, so watch to see if that volume gets better into the close, or in the next few trading sessions.
BioCryst Pharmaceuticals is also another heavily shorted name since around 11% of their tradable float is currently sold short by the bears. If this stock is truly putting in a bottom, then look for those bears to cover some of their short positions and lock in profits.
Another under-$10 name that's starting to trigger a big breakout today is medical equipment and supplies player
. This stock has been a loser in 2011 with shares off by over 30%.
If you take a look at the chart for DexCom, you'll notice that this stock plunged from its September high of $13.69 to a recent low of $6.75 a share hit in November. Since printing that low, the stock has started to firm up and ramp higher while shares are making higher lows, which is bullish. Now DXCM is starting to trigger a big breakout with shares moving above some near-term overhead resistance levels.
Traders should now watch DXCM to see if the stock can maintain a sustained high-volume move and close above $8.53 to $8.56 a share. This stock has already started to trend above those levels intraday with shares currently trading near $9.05. Look for volume at today's close that registers near or above its three-month average action of 707,829 shares to signal that this stock wants to trend significantly higher in the near future.
One could be a buyer of this stock off any noticeable weakness since the breakout has already started to happen. I would simply use a mental stop that's just below its 50-day moving average of $8.32 in case this breakout fails. I would then add to any long positions once DXCM takes out some near-term overhead resistance at $11.05 with volume. Target a run back toward $12.49 (200-day) or possibly $13.69 a share.
DexCom has a decent short interest since 9.1% of its tradable float is currently sold short by the bears. This breakout today, if it holds, could kickoff a much larger short-covering rally in the near future.
One final under-$10 stock that's nearing some key breakout levels on monster upside volume is
. This company operates out-of-home advertising network using mobile digital television broadcasts to deliver content and advertising on mass transportation systems in the People's Republic of China. This stock has been crushed by the bears in 2011 with shares off by over 70%.
If you take a look at the chart for VisionMedia, you'll see that this stock bottomed in late November at $1.08 a share. Since hitting that bottom, the stock has started to trend sideways between $1.41 and $1.22 for most of December. Shares of VISN are now bouncing big today by over 7% at $1.37 on monster volume. At last check, volume has already registered over 9.6 million shares, which is well above its three-month average action of 267,010 shares. This huge volume spike is now pushing the stock close to some key breakout levels.
Market players should now watch VISN for a breakout trade if the stock can sustain a move and close above $1.41 to $1.45 (50-day) with volume. Of course the volume is already there today, so watch to see how the stock closes, and watch for any follow throw upside days with heavy volume. If we get that close soon above $1.41 to $1.45 with volume, then look for VISN to make a quick run at $1.64 a share. If $1.64 gets taken out with volume, then look for a run back towards $1.90 to $2.57 (200-day).
One could be a buyer of this stock off any noticeable weakness and simply use a mental stop just below $1.22 a share. You could also buy off strength and get long once $1.41 to $1.45 is taken out to the upside with volume. I would then add to any long positions once $1.64 is also taken out with high-volume.
To see more hot under-$10 stocks that could be poised for higher prices, 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.