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 from Wednesday, including
, which skyrocketed higher by 37%;
, which soared by 13%;
Double Eagle Petroleum
, which ripped higher by 12.4%; and
( FSII), which closed up 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.
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With that in mind, here are
One under-$10 name that looks ready to trigger a near-term
, a clinical-stage biopharmaceutical company focused primarily on the development of therapeutic products for the treatment of cancer. This stock has been beaten-up by the sellers so far in 2012, with shares down by close to 50%.
If you take a look at the chart for Oncothyreon, you'll see that this stock gapped down big in March from over $8 to under $5 a share on monster volume. Following that massive move lower, this stock has continued to downtrend with shares hitting a recent low of $3.35 a share. During that downtrend, shares of Oncothyreon have consistently made lower highs and lower lows, which is bearish technical price.
That said, the stock has started to reverse that trend recently with shares now making higher lows and higher highs. This stock is now trading within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in ONTY if it can manage to trigger a breakout above some near-term
at $3.99 to $4.20 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 683,880 shares. If we get that action soon, then ONTY could easily tag its next significant overhead resistance levels at $4.50 to $5.50 a share, or possibly even its 200-day moving average of $6.09 a share.
If you like the look of ONTY here, then you could buy it off weakness and simply use a stop around $3.50 a share. You could also buy it off strength and get long once it takes out $3.99 to $4.20 with volume. Keep in mind that a move over $3.99 will put ONTY back above its 50-day
of $3.94 a share which would be bullish technical price action. Traders should consider any sustained trend above its 50-day for ONTY as bullish price action.
Another under-$10 stock in the financial services complex that looks ready to trigger a breakout is
( NTSP), a provider of general-purpose reloadable prepaid debit cards cards and related alternative financial services to underbanked consumers in the U.S. This stock hasn't done much so far in 2012, with shares down by around 5%.
If you take a look at the chart for NetSpeed, you'll notice that this stock has been trading within a tight range for the past two months, with shares bouncing between $6.40 on the downside and $8.27 on the upside. This range-bound trading action has now set this stock up for a potential move outside of the range, and that move looks to be gearing up for a topside breakout. The reason for this is because NTSP has recently ripped back above both its 200-day
at $7.12 and its 50-day moving average at $7.30 a share with strong volume.
Traders should now look for long-biased trades in NTSP if it can manage to trigger a breakout trade above some near-term overhead resistance at $7.90 to $8.27 a share with
. Look for volume on a sustained move or close above those levels that register near or above its three-month average action of 324,877 shares. If we get that action soon, then NTSP could easily re-test and possibly take out its February high of $9.70 a share rather quickly.
If you're in the bull camp on NTSP, then one could anticipate the breakout and look to buy this stock off weakness and simply use a stop around the 50-day moving average of $7.30 a share. One could also buy off strength and get long once it clears $7.90 and then add more once the volume comes in on a move over $8.27 a share.
An under-$10 name in software and programming complex that's trading within range of a major breakout trade is
, which is engaged in the development, sale and service of software solutions related to mobile imaging applications and intelligent recognition software. This stock is stock has been destroyed by the bears so far in 2012, with shares down by over 60%.
If you take a look at the chart for Mitek Systems, you'll notice that this stock topped out back in March at just under $13 a share. After forming that top, shares of MITK plunged with big selling volume to under $6 a share. Then, in early May, this stock gapped down big from over $5 to under $3 a share with heavy volume. Following that gap-down, the stock has continued to trend lower and it's recently hit a low of $1.90 a share.
That said, now the stock has started to reverse the downtrend during the last few weeks, and it's now within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in MITK if it can manage to
above yesterday's high of $3.12, and then above its May gap-down day high of $3.30 a share with high volume. Look for a sustained move or close above those levels on volume that hits near or well above its three-month average action of 1.2 million shares. If we get that action soon, then MITK start to fill that gap and possibly take out its 50-day moving average of $3.86 a share. A move higher through its 50-day could easily spike MITK close to $6 a share as that gap gets filled.
If you're bullish on MITK, then one could buy off weakness and simply use a stop just below Wednesday's low of $2.39 a share. If this stock is truly ready for big spike higher, then I doubt it takes out that low. It might be better to buy off
and get long once MITK gets into that gap above $3.30 a share, and then add to any long positions above its 50-day at $3.86 a share. I would consider it very bullish price action for MITK if it can recapture its 50-day and sustain a
above that level.
Another under-$10 name in the computer services complex that's trading very close to triggering a major breakout is
( KITD). Through its operating subsidiaries, KIT Digital provides enterprise clients an end-to-end technology platform for managing IP-based video assets across the browser, mobile device and Internet protocol television IPTV set-top box-enabled television sets. This stock is off to a rough start in 2012, with shares off by around 54%.
If you take a look at the chart for KIT Digital, you'll see that this stock has been stuck in a nasty downtrend for the last four months, with shares dropping from a high of $12.65 to a recent low of $2.64 a share. During that sharp move lower, shares of KITD have consistently made lower highs and lower lows, which is bearish technical price action.
That said, the stock has started to bounce strong off that low of $2.64 with shares now trading just under $4 a share. That bounce is quickly pushing KITD within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in KITD if it can manage to trigger a breakout above some near-term
at $4.20, and then above a recent gap-down day high of $5 a share with high-volume. Look for volume off a sustained move or close above those levels that register near or above its three-month average action of 1.7 million shares. If we get that action soon, then KITD will look even more bullish if it takes out its 50-day
at $5.12 a share with volume. This stock could easily spike back towards $7 a share or higher if all those levels get taken out to the upside with heavy volume.
I would look to buy KITD off strength once it takes out $4.20 with volume, and then add once it blasts above $5 to $5.12 a share with volume. Once could simply use a stop just a few percentage points below $4.20 if that breakout triggers, just in case KITD isn't ready to trend higher.
I also featured KIT Digital yesterday in "
One more under-$10 name that looks poised for some big upside is
, an intellectual property and technology licensing company engaged in the design, development and licensing of memory and logic interfaces, lighting and optoelectronics, and other technologies. This stock is off to a weak start so far in 2012, with shares off by close to 30%.
If you take a look at the chart for Rambus, you'll notice that this stock has locked inside a bearish downtrend for the past five months, with shares plunging from a high of $9.29 to a recent low of $4.16 a share. During that monster move lower, shares of Rambus have consistently made lower highs and lower lows, which is bearish technical price action.
That said, during the last month and change, shares of Rambus have started to uptrend and reverse that bearish trend with shares now making higher lows and higher highs. This stock has also just pushed back above its 50-day moving average of $4.92 a share with heavy volume.
Traders should now look for long-biased trades in RMBS if it can manage to trigger a near-term breakout trade above $5.55 to $5.94 a share with high volume. Look for a sustained move or close above those levels on volume that's near or above its three-month average action of 1 million shares. If we get that action soon, then RMBS could possibly tag its next significant overhead resistance levels at $6.83 to $7.50 a share, or possibly even its 200-day moving average of $8.95 a share.
One could be a buyer of RMBS off weakness to anticipate the breakout and simply use a stop just below its 50-day moving average of $4.92 a share. I think it's critical that RMBS holds its 50-day if there's going to be any chance for that breakout to trigger soon, so watch how it acts if it re-tests that level. Volume on Wednesday registered over 3 million shares as the stock bounced off its 50-day. That was one of the highest upside volume days since February. Traders should look for a continuation of that
if RMBS takes out $5.55 to $5.94 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.