Another under-$10 stock that looks ready to trigger a major breakout trade is Zogenix ( ZGNX), which is engaged in the commercializing and developing products for the treatment of central nervous system disorders and pain. This stock has been hammered by the bears during the last three months, with shares down by 42%.

If you take a look at the chart for Zogenix, you'll notice that this stock has been uptrending strong for the last two months, with shares soaring from its low of $1.11 to its recent high of $1.60 a share. During that uptrend, shares of ZGNX have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ZGNX within range of triggering a major breakout trade.

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Market players should now look for long-biased trades in ZGNX if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $1.47 a share and then once it takes out more resistance levels at $1.50 to $1.60 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 1.4 million shares. If that breakout hits soon, then ZGNX will set up to re-fill some of its previous gap down zone from last December that started around $2.40 a share.

Traders can look to buy ZGNX off any weakness to anticipate that breakout and simply use a stop that sits close to some near-term support at $1.35 to $1.27 a share. One can also buy off strength once ZGNX takes out those breakout levels with volume and then simply use a stop that sits just below its 50-day moving average of $1.47 a share or near $1.35 a share.

This stock has a decent amount of bears involved in the name, since its current short interest as a percentage of its float is rather high at 9.4%. Look for a monster short-squeeze to develop if shares of ZGNX get into that gap down zone with heavy upside volume.

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