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 26%;
, which surged by 25%;
, which ripped higher by 19%; and
Spanish Broadcasting System
, which ended up 17%. 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
that look poised to potentially trade higher from current levels.
One under-$10 name that's trading within range of a major breakout trade is
. This company provides continuous, real-time ambulatory outpatient management solutions for monitoring clinical information regarding an individual's health. This stock hasn't done much so far in 2012 with shares up just 6.7%.
If you take a look at the chart for Cardionet, you'll see that this stock has been destroyed by the sellers for the past three months, with shares dropping from a high of $3.44 to a recent low of $1.99 a share. During that plunge, shares of Cardionet have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has started to find some buying interest around $2 a share after it tested that price level twice and then bounced higher in the last few weeks. That action has now pushed BEAT within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in BEAT if it can manage to trigger a break out above some near-term overhead resistance at $2.36 a share with high-volume. Look for a sustained move or close above that level with volume that's near or above its three-month average action of 74,373 shares. If we get that action soon, then BEAT could easily bounce sharply higher and possibly take out its 50-day moving average at $2.69 and its 200-day moving average at $2.80 a share.
If you like the look of BEAT here, then you could buy it off weakness and simply use a stop around $2.04 a share. You could also buy it off strength and get long once it takes out $2.36 with volume. At last check, BEAT has hit an intraday high today of $2.31 and volume is tracking in very strong with over 150,000 shares traded.
Another under-$10 stock in the home improvement complex that looks poised for higher prices is
. This company is a supplier and manufacturer of structural and related building products for residential new construction. This stock has been on fire so far in 2012 with shares up around 80%.
If you take a look at the chart for Builders FirstSource, you'll notice that this stock has been uptrending extremely strong for the last six months, with shares soaring from a low of $1.70 to a recent high of $4.55 a share. During that monster move higher, shares of Builders FirstSource have mostly made higher highs and higher lows, which is bullish technical price action. During the last month, this stock has trended sideways a bit between $3.38 and $4.48 a share. That sideways action is now setting up BLDR to take out its 50-day moving average moving average at $3.91 and potentially spike significantly higher.
Market players should now look for long-biased trades in BLDR if it can manage to trigger a breakout trade above its 50-day at $3.91, and then above some near-term overhead resistance at $4.10 a share with high volume. Look for volume on a sustained move or close above those levels that register near or above its three-month average action of 371,216 shares. If that breakout triggers soon, then BLDR will setup to re-test its 52-week high at $4.55 a share and possibly take that level out.
If you're bullish on BLDR, then one could anticipate the breakout and look to buy this stock off weakness and simply use a stop around $3.38 a share. One could also buy off strength and get long once it clears its 50-day at $3.91 with high-volume. Any high-volume move below $3.38 would keep me away from BLDR for now.
One under-$10 name in the oil and gas complex that's trading within range of a major breakout trade is
. This is an oil and gas exploration and development company focused primarily on resource properties consisting mainly of unconventional oil and gas reserves. This stock is down about 9% so far in 2012.
If you take a look at the chart for Triangle Petroleum, you'll notice that the bears hammered this stock during the last three months, with shares plunging from a high of $8.26 to a recent low of $4.63 a share. During that massive slide lower, shares of Triangle Petroleum have mostly made lower highs and lower lows, which is bearish technical price action. That said, this stock just put in a near-term double bottom at $4.68 to $4.63 a share. Shares of TPLM are also now trending very close to triggering a major breakout trade.
Market players should now look for long-biased trades in TPLM if it can manage to trigger a breakout above its 50-day at $5.79 and its 200-day at $5.91, and then above some near-term overhead resistance at $5.95 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 485,105 shares. If we get that action soon, then TPLM could easily trend up toward its next significant overhead resistance levels at $6.89 to $7.60 a share.
If you buy TPLM off weakness, then I would simply use a stop at around today's low of $5.25 a share. I would rather play this name off strength though on a move above both its 50-day and 200-day moving averages with volume. At last check, TPLM has hit an intraday high today of $5.65 on volume of over 250,000 shares. Some of that strength today is due to a research report from Wunderlich Securities, which gave the stock a buy rating an $8 price target.
Another under-$10 name in the biotechnology and drugs complex that's trading very close to triggering a major breakout is
. This company's liposomal technology is designed specifically for delivery of pharmaceuticals to the lung and it provides for potential improvements to the conventional inhalation methods of delivering drug to the pulmonary system. This stock is off to a solid start in 2012 with shares up around 20%.
If you take a look at the chart for Insmed, you'll notice that this stock recently formed a perfect double bottom at around $2.66 to $2.69 a share. Both times in the past month or so that shares of Insmed have hit those levels, the stock has subsequently skyrocketed higher. Now shares of Insmed are trending very close to triggering a major near-term breakout trade. If that trade hits, then INSM could still have plenty of upside left from its current price near $3.60 a share.
Market players should now look for long-biased trades in INSM if it can manage to trigger a breakout above some near-term overhead resistance at $3.66, and then above its 200-day moving average of $3.72 a share with high-volume. Look for volume off a sustained move or close above those levels that registers near or above its three-month average action of 128,528 shares.
If we get that action today or soon, then INSM could easily re-test its May high of $4.93, or possibly its 2012 high of $5.50 a share. At last check, INSM has hit an intraday high of $3.75 on volume that so far is below its three-month average action.
I would look to buy INSM off strength as long as it maintains a trend above $3.66 and $3.72 a share with strong upside volume flows that are close to 128,528 shares. You could use a stop at around $3.50 in case INSM isn't ready to break out here and trend higher. That said, As long as its trending over $3.66 to $3.72 a share, then this stock has a great chance of producing some big gains.
One final under-$10 name that's trending near a big breakout is
. This is a development-stage biopharmaceutical company focused primarily on the development of drugs to treat gastrointestinal disorders and diseases. This stock is off to a strong start in 2012 with shares up over 25% so far.
If you take a look at the chart for Synergy Pharmaceuticals, you'll notice that the sellers creamed this stock recently, after shares plunged from $7.08 to under $4.50 a share with heavy volume. That move resulted in gap down after it had broken out above $4.50 and made that huge run to $7.08 a share.
Since that big gap lower, shares of Synergy Pharmaceuticals have been trending sideways for over a month between $4.13 and $4.95 a share. This sideways trend has resulted in very tight trading action, as this stock has coiled up right around both its 50-day at $4.48 and its 200-day at $4.40 a share.
Traders should now look for long-biased trades in SGYP if it can manage to trigger a near-term breakout trade above $4.75 to $4.95 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 238,000 shares. If we get that action soon, then SGYP could potentially fill that previous gap down and tag $6 to $7 a share.
One could be a buyer of this stock off weakness and anticipate the breakout, and simply use a stop just below its 200-day moving average of $4.40 a share. Maybe use a stop at around $4.25 a share if you get long off weakness. You can also just wait for SGYP to take out $4.75 and then $4.95 with volume, and buy into that strength with a stop right around $4.60.
On Wednesday, over 1 million shares traded for SGYP as the stock closed up modestly. That big-time volume indicates that large traders could be snapping up SGYP here, so keep this on your breakout radar.
To see more hot under-$10 equities, check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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.