WINDERMERE, Fla. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain 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 by 40.6%;
, which blasted to the upside by 33.6%;
, which ripped higher by 29.8%; and
, which closed up 22.6%. 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 stock in the biotechnology and drugs complex that's trading within range of triggering a
, which engages in the commercialization of non-personalized (allogeneic) cell therapy products for the treatment of several severe degenerative, ischemic and autoimmune disorders. This stock is off to a hot in 2012, with shares up over 30% so far.
Just this morning, Pluristem received an invitation from the U.S. National Institutes of Health to submit its placenta-based stem cells to the agency for evaluation in treating acute radiation syndrome. Maxim Group also initiated coverage on the stock on Wednesday with a buy rating and an $8 price target.
If you take a look at the chart for Pluristem Therapeutics, you'll notice that this stock recently broke out above some near-term
at $2.60 to $2.65 a share with monster volume. As the stock broke out, volume clocked in at 1.9 and 4.4 million shares, which is well above its three-month average volume of 347,989 shares. Following that breakout, this stock soared and touched its recent high of $3.85 in just two trading sessions. Since tagging that high, this stock has pulled back to around $3 a share, and it's now setting up to potentially breakout again and rip higher.
Traders should now look for long-biased trades in PSTI if it can manage to trigger a breakout trade above some near-term overhead resistance at $3.70 to $3.85 a share with high volume. Look for a sustained move or close above $3.85 a share with volume that registers near or above its three-month average action of 347,989 shares. If that breakout triggers soon, then PSTI will have an excellent chance of re-testing and possibly taking out its 2011 high of $4.38 a share. In fact, if we get a
, then I believe that PSTI is heading towards $5 to $6 a share after it clears $3.85 to $4.38 a share with volume.
If you're in the bull camp on PSTI, then I would look to buy this stock off any weakness, and simply use a stop around $3.20 to $3 a share. I would prefer to get long this name off strength once it clears $3.70 to $3.85 with volume, and then simply use a stop a few percentage points below $3.50 a share. Those lower stops I suggested for buying off weakness should only be used if you get into this name on a significant pullback.
Another under-$10 stock in the biotechnology and drugs complex that looks ready to trigger a major breakout trade is
, a specialty pharmaceutical company focused on commercializing products for the hospital, respiratory and related specialty markets. This stock has been trending higher so far in 2012, with shares up over 25%.
This company just announced on Wednesday that the FDA has scheduled a review of the new drug application for Lixivaptan. The drug treats a condition in which the blood sodium levels of patients with heart failure are abnormally low. The FDA panel will meet to discuss Lixivaptan on Sept. 13.
If you take a look at the chart for Cornerstone Therapeutics, you'll notice that this stock has been uptrending strong for the past month and a half, with shares soaring from $4.88 to a recent high of $7.25 a share. During that sharp move higher, shares of Cornerstone Therapeutics have been making higher lows and higher highs, which is bullish
. This stock also just triggered a major breakout trade once it cleared some key overhead resistance levels at $6.96 to $7.00 a share with monster volume. Volume for the last two trading sessions as registered 807,000 shares and 203,000 shares, which is well above its three-month average action of 64,970 shares. This move is now setting up CRTX to continue its run higher, possibly right into its FDA meeting on Sept. 13.
Traders should now look for long-biased trades in CRTX if this stock can manage to sustain its breakout above $6.50 to $7.00 a share with strong
. I would consider any upside volume day that registers near or above 64,970 shares as bullish. If we continue to see CRTX sustain that trend, then this stock has a great chance of re-testing and possibly taking out its next major overhead resistance levels at $8.50 to $9.20 a share.
If you like the setup for CRTX here, then one could look to buy this stock off any weakness and simply use a stop just under $6.50 a share, or possibly even around $6.20 if you want to give it more room to the downside. This stock could even pullback to $6 a share and still be well within its healthy uptrend, but I would prefer to see it hold above those key
of $6.50 to $7 a share.
One under-$10 name in the technology complex that looks to trigger a major breakout trade is
, a development-stage company engaged in developing software for mobile phones. This stock has been on fire so far this year, with shares up a whopping 300%.
Investors are starting to get very excited about the prospects for Vringo, which is suing
and a slew of other tech companies for patent infringement. If Vringo were to either win its lawsuit outright or just get these companies to settle pretrial for large damages, then this stock could be tremendously undervalued at current levels. Some people in the markets think that Vringo could trade well north of $30 a share if it were to collect billions in damages.
If you take a look at the chart for Vringo, you'll notice that this stock has been in a monster uptrend for the last six months, with shares skyrocketing from a low of around $1 to a recent high of $5.45 a share. During that huge move to the upside, shares of Vringo have been consistently making higher lows and higher highs, which is bullish technical price action. After hitting that high of $5.45, VRNG has pulled back right to its 50-day
, and it has now started to uptrend again with big volume flows.
During the last three trading sessions, the upside volume for Vringo has registered 7.4, 6.5 and 6.9 million shares, which is well above its three-month average of 1.7 million shares. In fact, almost all of the significant volume days during the last four months have been on up days for the stock. This tells me that large institutional traders are accumulating shares aggressively, since the price has continued higher with the volume.
Traders should now look for long-biased trades in VRNG if it can manage to
above some near-term overhead resistance at $4.25 to $4.50 a share with high volume. Look for volume on that breakout that hits near or above its three-month average volume of 1.7 million shares. If we get that action, then VRNG will have an awesome chance of re-testing and possibly taking out its recent high of $5.45 a share. In fact, if we get that take out of $5.45, then I think it's very possible to see this stock hit $10 to $15 in the near future.
If you're bullish on VRNG, then once could load up on this stock off weakness and simply use a stop right below its 50-day moving average of $3.68 a share. You could even use stops near $3.20 a share if you wanted to give it more room. A better strategy might be to just buy off strength once VRNG clears and closes above $4.25 to $4.50 a share with strong volume. This stock is a favorite target of the short-sellers. The current short interest as a percentage of the float for VRNG is a whopping 32%. The bears have also been increasing their bets from the last reporting period by 32.2%, or by about 928,000 shares. If a high-volume breakout for VRNG triggers soon, then we could easily see an epic short-squeeze develop since the bears are swarming all over this stock. Be ready for it.
Pacific Biosciences of California
Another under-$10 name in the biotechnology and drugs complex that looks for a sharp move higher is
Pacific Biosciences of California
, which develops, manufactures and markets an integrated platform for genetic analysis. The company has developed a technology to study the synthesis and regulation of DNA. This stock is off to a weak start in 2012, with shares off by around 20%.
If you take a look at the chart for Pacific Biosciences, you'll notice that this stock has been stuck in a nasty downtrend for the last six months, with shares plunging from over $5 to a recent low of $1.76 a share. During that massive move lower, shares of PACB have been consistently making lower highs and lower lows, which is bearish technical price action. That said, I believe this stock has started to put in a bottoming process since buyers have stepped in over the last two months at $1.76 to $1.88 a share. Also, PACB has started to challenge its 50-day moving average of $2.12 a share, which is bullish action.
This company is set to report earnings today after the market close. As long as we don't get a
(ZNGA)-style report, then this stock could be finally done going lower. I would advise traders to wait until after PACB reports and then look to trade the potential breakout.
Traders should now look for long-biased trades in PACB if it can manage to trigger a break out above some near-term overhead resistance at $2.19 to $2.35 a share with
. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 401,394 shares. If that breakout triggers after earnings, then PACB has an excellent chance of re-testing and possibly taking out its next major overhead resistance levels at $2.87 to its
of $3.08 a share.
If you like the setup here for PACB, then look to buy this stock off weakness and simply use a stop just below some near-term support at $1.88 a share. I would rather get long PACB off strength once it starts to sustain a trend above its 50-day at $2.12 a share with strong upside volume flows. I would simply use a stop that's a few percentage points below its 50-day if you buy off strength. Remember, look to play this after earnings, not before.
One final under-$10 name in the biotechnology and drugs complex that looks ready for a large move higher is
, which discovers and develops treatments for patients suffering from pain and immuno-inflammatory diseases. This stock is off to a slow start in 2012, with shares off by over 15% so far.
This company has a major catalyst on the horizon, since it will meet with the FDA on Sept. 30 to review its phase II topline data for its rheumatoid arthritis drug Synavive. This major event could lead to a large run-up in this stock as trades pile in to get in well before any bullish FDA news.
If you take a look at the chart for Zalicus, you'll see that this stock recently made a monster run from 71 cents per share to a high of $1.62 a share. During that move, shares of Zalicus were uptrending perfectly, with the stock making higher lows and higher highs, which is bullish technical price action. Also, during that run
flowed into the stock early on in the move. After hitting that high of $1.62, shares of ZLCS have completely reversed its uptrend and plunged down to its recent low of 95 cents per share. That said, it now looks like ZLCS is gearing up to make another monster run higher if it can clear some key moving averages.
Traders should now look for long-biased trades in ZLCS if this stock can manage to hold its recent lows near 95 to 88 cents per share, and then take out both its 200-day
at $1.09 and its 50-day at $1.10 a share with high volume. Look for a sustained move or close above those key moving averages with volume that's near or above its three-month average action of 2.3 million shares. If we get that action, then ZLCS should easily re-test and possibly blow right through that recent high of $1.62 a share.
One could look to buy this stock off any weakness and simply target your stops just under 88 cents per share. It's possible that ZLCS could fall down to 80 or 70 cents per share if another biotech player,
, were to receive a bad ruling from the FDA on its rheumatoid arthritis drug today. I don't think that's going to happen for HZNP though, but it's good to be prepared. You might want to wait and see how that pans out, just in case ZLCS falls further from here, and then readjust stops. I would rather just buy this off strength once it clears both its 50-day and 200-day with heavy volume. One could simply use a stop just below 95 cents if you buy it off strength.
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.