While the effects of Hurricane Katrina could put a drag on the economy near term, longer term there should be demand for upgrades in broadband and related Internet protocol applications, as well as repairs and rebuilding along the Gulf Coast. Because of that possible catalyst for growth, I focused on finding stocks in that category in the $3 to $5 range.

When you look to buy a tech stock that trades between $3 and $5, you must realize that these stocks trade below $5 for a reason. Also, most brokerage firms will not allow their clients to buy shares priced below $5 on margin.

As with stocks trading between $1 and $3, which I covered in an

earlier column, these companies are at risk of bankruptcy. However, unlike that lower-priced group, stocks trading between $3 and $5 have a better chance of survival. Therefore, you can consider the purchase of shares below $5 as being like purchasing a survival option, making a bet that the share price can double before it declines by 50%.

There is an expiration date on these survival options, too, just as with options, which become worthless if not exercised in the money before they expire. These $3-to-$5 stocks can become worthless on bankruptcy. Keep in mind that risk when making your decisions about investing in this group.

I found three broadband/IP-related stocks trading in the $3 to $5 range that look promising, based upon my screening methods:

Image placeholder title

Lucent Technologies

(LU)

has graduated from the $1 to $3 range, but is still very undervalued, 65.3% so. It has a weekly chart profile that shifts to positive this week on a close Friday above the convergence of its five-week modified moving average and 200-week simple moving average at $2.96. This would target my quarterly risky level at $4.28.

Intellisync

(SYNC) - Get Report

is not as undervalued as Lucent, at 56.4% undervalued, but this enterprise software company could see some exciting price action soon. If it can hold my monthly pivot at $4.04 and quarterly pivot at $3.80, it could break above $5 and trade as high as my annual risky level at $10.26 by year-end. Right now, it has a positive weekly chart profile that stays positive on a close this week above its five-week MMA at $3.24.

Broadband player

Terayon Communication Systems

(TERN)

should trade higher as long as weakness holds my monthly pivot at $3.19. It's 55.1% undervalued currently, with a positive weekly chart profile. Its five-week MMA is at $3.22 and 200-week SMA is at $3.73.

If there are other stocks in this range (or other low-priced tech stocks) that you would like to see profiled, please

send me an email

. I will cover them in next Tuesday's Tech Trading Diary on

TheStreet.com

.

Understanding the Model

Fundamental screens:

I calculate a fair value for every stock, which is the price at which that stock can trade in a perfect world. Fair value is not a price target. Fair value is based on the stock's past data and projections for the future. Fair value is based on the trailing 12-month EPS, the forward 12-month estimated EPS and the yield on the 30-year Treasury.

How these data points are weighted is determined by a historical analysis of the stock's price history, with some 17 other variables influencing the calculation, depending upon the stock's sector and industry group. The other factors are the stock's weekly chart profile and the value and risky levels that my models provide. For instance, I will become positive on the homebuilders when they become 20% to 40% undervalued; that could happen after a technical correction.

Weekly chart profile:

A stock with a positive profile has a weekly close above its five-week modified moving average with a rising 12x3 weekly slow stochastic, which is a measure of momentum on a scale of zero to 100. A reading below 20 is oversold, while a reading above 80 is overbought.

Value levels, risky levels and pivots:

A value level is a price at which buyers should emerge on share-price weakness. A risky level is a price at which sellers should reduce holdings on share price gains. A pivot is a value or risky level that was violated in its time horizon, and can be expected to act as a magnet during the remainder of that time horizon. These levels are calculated in weekly, monthly, quarterly, semiannual and annual time horizons, based on the past nine closes in each time horizon. My theory is that the closes over a nine-year period are the summation of all bullish and bearish events for that market or specific stock.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Intellisync and Terayon to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Richard Suttmeier is president of Global Market Consultants, Ltd., chief market strategist for Joseph Stevens & Co., a full service brokerage firm located in Lower Manhattan, and the author of

TheStreet.com Technology Report

newsletter. At the time of publication, he had no positions in any of the securities mentioned in this column, but holdings can change at any time. Early in his career, Suttmeier became the first U.S. Treasury Bond Trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury Strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he invites you to send your feedback --

click here

to send him an email.