DELAFIELD, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for 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 big movers in the under-$10 complex from Thursday, including USEC (USU), which soared higher by 22%; NeoGenomics (NEO), which ripped to the upside by 20%; Timberline Resources (TLR), which spiked higher by 13.8%; and Timmins Gold (TGD), which trended to the upside by 12.7%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
One low-priced wireless communications player that recently ripped to the upside was NII Holdings (NIHD), which I highlighted in July 11's "5 Stocks Under $10 Set to Soar" at around 64 cents per share. I mentioned in that piece that shares of NII Holdings recently formed a double bottom chart pattern at around 57 to 54 cents per share. This stock was just starting to flirt with its 50-day moving average of 63 cents per share and it was quickly moving within range of triggering a major breakout trade above a key downtrend line at around 66 cents per share.
Guess what happened? Shares of NII Holdings started to trigger that breakout the same day as I highlighted the stock in my piece with decent upside volume. Then the following trading session shares of NIHD ripped sharply to the upside with strong upside volume, after 12.39 million shares traded vs. its three-month average action of 5.03 million shares. Shares of NIHD tagged an intraday high on July 15 of 84 cents per share, which represents a monster of gain of 30% in just three trading sessions. As you can see, trading small-cap stocks that breakout with volume can produce large profits very quickly.
Low-priced stocks are something that I tweet about on a regular basis. I frequently flag high-probability setups, breakout candidates and low-priced stocks that are acting technically bullish. I like to hunt for low-priced stocks that are showing bullish price and volume trends, since that increases the probability of those stocks heading higher. These setups often produce monster moves higher in very short time frames.
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 several under-$10 stocks that look poised to potentially trade higher from current levels.
One under-$10 technology player that's starting to trend within range of triggering a major breakout trade is Aviat Networks (AVNW), which designs, manufactures and sells a range of wireless networking products, solutions, and services in North America and Internationally. This stock has been hit hard by the sellers so far in 2014, with shares off sharply by 45%.
If you take a glance at the chart for Aviat Networks, you'll see that this stock has been uptrending over the last two months and change, with shares moving higher from its low of 99 cents per share to its recent high of $1.35 a share. During that uptrend, shares of PRKR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AVNW within range of triggering a major breakout trade.
Traders should now look for long-biased trades in AVNW if it manages to break out above some near-term overhead resistance levels at $1.28 to $1.30 a share and then once it clears $1.35 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 action of 861,975 shares. If that breakout triggers soon, then AVNW will set up to re-fill some of its previous gap-down-day zone from May that started near $1.60 a share.
Traders can look to buy AVNW off weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $1.15 a share. One can also buy AVNW off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.