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 in the under-$10 complex Thursday, including
United Community Financial
, which ripped higher by 21%;
, which soared 20%;
, which surged 16.9%; and
, which closed up 14.5%. 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.
With that in mind, here's a look at
One under-$10 name that's trading within range of triggering a big breakout trade is
, a development-stage biopharmaceutical company focused on acquiring and developing, small molecule therapeutics for the treatment of diseases with unmet medical need with a specific focus on the U.S. market. This stock is off to a booming start in 2012, with shares up over 95%.
If you take a look at the chart for MediciNova, you'll notice that this stock has been uptrending strong since the start of the year, with shares spiking from a low of $1.60 to a recent high of $3.38. During that uptrend, this stock has consistently made higher lows and higher highs, which is bullish technical price action. Shares of MNOV have also found buying interest almost every time its pulled back to its 50-day
, after it crossed above that average in February. Now MNOV is trending very close to triggering a major breakout trade.
Traders should now look for long-biased trades in MNOV if it can manage to trigger a break out above some near-term overhead
at $3.38 a share with high volume. Look for volume on that move that's near or well above its three-month average action of 20,642 shares. Volume on Thursday registered 259,226 shares and the stock closed up 11.2% to $3.36. If that breakout triggers soon, look for MNOV to trend significantly higher towards its next major overhead resistance levels at $4.50 to $5.90 a share. I would especially get bullish on MNOV if it bust above its 2011 gap down day high near $3.50 a share with volume.
As long as MNOV is trending above $3.38 to $3.50 a share with strong upside volume flows, then I would be stalking this stock for long trades. I would simply avoid this stock if it were to trade back below its 50-day moving average of $2.73 with heavy volume.
THT Heat Transfer Technology
An under-$10 stock in the capital goods complex that looks poised for a major spike to the upside is
THT Heat Transfer Technology
, which is engaged in the manufacturing and trading of plate heat exchangers and various related products. This stock is off to a monster start in 2012 with shares up over 95%.
If you take a look at the chart for THT Heat Transfer Technology, you'll notice that during the last six months, this stock has been uptrending strong from a low of 72 cents per share to a recent super spike of $3.68 a share. Following that super spike in early April, shares of THTI have pulled back towards its current price of $1.73 a share. On Thursday, this stock bounced off its 200-day moving average of $1.63 on volume of 379,138 shares which is well above its three-month average action. That move has now pushed THTI within range of triggering a near-term
Market players should now look for long-biased trades in THTI if it can manage to take out some near-term overhead resistance at $2 to $2.27 a share with high-volume. Look for volume off a sustained move or close above those levels that hits near or well above its three-month average action of 115,240 shares. If that breakout triggers soon, then THTI could easily super spike again back towards $2.80 or even that recent high of $3.68 a share.
If you're in the bull camp on THTI, then I would consider anticipating that breakout and looking for long trades as long as this stock is trending above its 200-day and 50-day moving averages with strong
. I would lean more bullish if THTI is trending above $2 to $2.27 since that will spark more interest among momentum traders looking to play any strength off the breakout.
An under-$10 name in the electric utilities complex that's trading within range of a major breakout trade is
, which, together with its subsidiaries, provides energy, capacity, ancillary, and other energy services to wholesale customers in the energy market in the U.S. This stock is off to a slow start in 2012, with shares off by around 20%.
If you take a look at the chart for GenOn Energy, you'll see that this stock just sold off hard from its March high of $2.66 a share to its recent low of $1.90 a share. After tagging that low, shares of GenOn Energy have rebounded towards its current price of $2.08 a share, and it's now moving within range of a major near-term breakout trade.
Market players should now look for long-biased trades in GEN if it can manage to break out above some near-term overhead resistance levels at $2.18 to its 50-day moving average of $2.24 a share with high-volume. Look for a sustained move or close above those levels on volume that's close to well above its three-month average action of 8.1 million shares. If we get that action soon, then GEN has a great chance of skyrocketing rather quickly back toward that March high of $2.66 or even $2.80 a share or higher.
What I like about GEN here is that the volume on Thursday was one of the
in the last couple of weeks, and it came on a day that the market sold off sharply. This could be an early indicator that large traders are getting long GEN at current levels. That said, it's important to only get bullish on GEN if it's trending above $2.18 to $2.24 with strong upside volume flows. A failure to get above those levels and then take out some near-term
at $1.98 a share would be bearish for this stock.
GenOn shows up on a list of
Another under-$10 stock that looks ready to trigger a major breakout trade is
, a full-service residential real estate brokerage firm. This stock is off to a hot start in 2012, with shares up 45%.
If you take a look at the chart for ZipRealty, you'll notice that this stock spiked big on Thursday by around 19.4% to $1.60 a share on slightly lower than average volume. That sharp spike pushed ZIPR back above both its 50-day and 200-day
ahead of its quarterly earnings report, which is due on Tuesday, May 8, after the market close.
That move also pushed ZIPR into
since the stock took out some near-term overhead resistance at $1.55 to $1.57 a share. If this breakout is the real deal, then ZIPR could move substantially higher into its earnings report, and potentially after.
Market players should now look for long-biased trades in ZIPR as long as it holds that breakout from Thursday, and if it's trending above $1.60 with strong upside volume flows. I would consider any upside volume days that register volume of 70,369 shares or higher as bullish action. If we continue to see ZIPR trending over $1.60 with bullish volume, then this stock could easily hit $1.90 to $2.20 a share in the very near future.
One more under-$10 stock that looks poised for a sharp move higher is gold player
, which engages in the design, manufacture, and sale of gold jewelry and Chinese ornaments in the People's Republic of China. It provides a range of gold products, including gold necklaces, rings, earrings, bracelets, pendants and gold bars. This stock has been uptrending strong so far in 2012, with shares up 80%.
If you take a look at the chart for Kingold Jewelry, you'll notice that this stock made a monster spike on Thursday of 23.3% to $2.06 a share on monster volume. Volume registered 1.23 million shares which are well above its three-month average action of 172,979 shares. This move pushed KGJI back above its 50-day moving average of $1.74 ahead of the company's earnings report which is set for Wednesday, May 9, after the market close. That big spike has also pushed KGJI within range of triggering a major near-term breakout trade.
Traders should now look for long-biased trades in KGJI if it can manage to clear some near-term overhead resistance at $2.24 a share with high-volume. Look for volume on that move that's near or well above its three-month average action of 172,979 shares. If we get that action soon, then look for KGJI to hit its next major overhead resistance level at $2.75 to $3.15, or possibly even $3.50 a share. Those first levels of $2.75 to $3.15 could easily get hit ahead of its earnings report, and $3.50 is more likely after earrings if the company reports a solid quarter.
Keep in mind that KGJI made that sharp move higher Thursday into a weak overall market with monster upside volume. This could easily bring in more momentum traders ahead of its earrings report since those same traders were buying up this stock despite the market weakness. I would be stalking this stock ahead of May 9 for any high-volume strength above $2.24 a share. There's nothing but air until almost $3 if $2.24 is taken out, so be ready to get long if we get that breakout soon.
To see more hot under-$10 equities, 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.