Cytori Therapeutics

One under-$10 stock that's worth keeping an eye on is medical products and device maker for regenerative medicine Cytori Therapeutics ( CYTX). This stock has been hammered by the sellers in 2011, with shares off by over 43%.

If you take a look at the chart for Cytori, you'll notice that this stock has been downtrending from its July high of $5.72 to its recent low of $2.32 a share. After hitting that low, the stock has rebounded and started to print higher lows, which could be signaling a bullish trend change. As long as this stock continues to make higher lows, then traders should watch CYTX for a breakout in the near-term.

Market players should look for a breakout to trigger if CYTX can clear and close above its 50-day moving average of $3.10 a share on solid volume. Look for volume that's tracking in close to or above its three-month average action of 432,400 shares. If the stock can close over its 50-day convincingly, then watch for a bigger breakout to trigger once it moves above $3.30 to $3.50 with volume.

One could be a buyer of this stock once it clears the 50-day with volume. If we get that move, I would then add to any long position once the stock takes out $3.30 a share with volume. Target a run back towards 4.50 a share, or possibly much higher if the bulls gain full control of this stock.

Keep in mind that this is a heavily shorted name since the current short interest as a percentage of the float for CYTX is 18%. Any near-term breakout could trigger a monster short-squeeze, so make sure to watch for any high volume spikes above that 50-day in the coming days or weeks.

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