MedQuist Holdings

One more under-$10 stock that's setting up for a big breakout and potential monster move higher clinical documentation solutions provider to the health care sector MedQuist Holdings ( MEDH). This stock has traded virtually flat in 2011, with shares off by just 0.33%. That said, if a near-term technical breakout triggers, then we could see a big pop that will put flat performance in the rearview mirror.

If you take a look at the chart for MedQuist, you'll notice that this stock was hammered from its August high of $13.77 to a recent low of $6.21 a share. After printing that low, the stock has rebounded sharply to its current price of around $9 a share. During that rebound, the stock has started to make higher lows and higher highs, which is bullish price action for any stock. The stock now sets up for a big breakout if some past overhead resistance can be taken out to the upside.

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Traders should monitor MEDH for a breakout if it can clear $9.08 to $9.65 a share on high volume. Look for volume that's tracking in close to or above its three-month average action of 255,530 shares. Volume today has already surpassed 320,000 shares, and the stock is moving up over 4% to $9 a share at last check. If we do see a sustained move and close above those resistance levels soon, then this stock could easily run make a 20% to 30% pop from current levels.

One could buy this stock once it breaks out over $9.08 with strong volume. I would simply use a mental stop that's a few percentage points below your breakout entry price. You could also anticipate the breakout and buy off any weakness back towards $8.50, with a mental stop just below that level.

The current short interest as a percentage of the float for MEDH is notable at 5.9%. That's not a huge short interest, but it's more than enough to spark a big short-squeeze if we do get that breakout in the coming days or weeks.

To see more hot under-$10 stocks, inclusing Power-One ( PWER), Office Depot ( ODP) and Aegean Marine Petroleum Network ( ANW), check out the Stocks Under-$10 Setting Up To Trade Higher 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.

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