5 Breakout Stocks Under $10 Set to Soar

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 Blonder Tongue Labs (BDR), which exploded higher by 46%; Interphase (INPH), which also surged higher by 45%; Chinanet Online (CNET), which ripped higher by 37%; and FreeSeas (FREE), which trended up by 20%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

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.

Onconova Therapeutics

One under-$10 biotechnology player that's starting to trend within range of triggering a big breakout trade is Onconova Therapeutics (ONTX), which  focuses on discovering and developing small molecule drug candidates to treat cancer. This stock has been hammered by the bears so far in 2014, with shares off by 53%.

If you take a glance at the chart for Onconova Therapeutics, you'll notice that this stock spiked sharply higher on Thursday right off its 50-day moving average of $4.96 a share with above-average volume. This move pushed shares of ONTX into breakout territory, since the stock cleared some near-term overhead resistance at $5.15 a share. This spike to the upside is now starting to push shares of ONTX within range of triggering another big breakout trade.

Traders should now look for long-biased trades in ONTX if it manages to break out above some near-term overhead resistance levels at $5.68 to $5.83 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 141,886 shares. If that breakout triggers soon, then ONTX will set up to re-test or possibly take out its next major overhead resistance levels $6.27 to $7 a share, or even $8 a share.

Traders can look to buy ONTX off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $4.96 a share. One can also buy ONTX off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Sequans Communications

Another under-$10 technology player that's starting to trend within range of triggering a big breakout trade is Sequans Communications (SQNS), which designs, develops, and supplies 4G LTE and WiMAX semiconductor solutions for wireless broadband applications. This stock has been hit hard by the sellers over the last six months, with shares down sharply by 32%.

If you take a look at the chart for Sequans Communications, you'll see that this stock bounced higher on Thursday right above its 50-day moving average of $1.71 a share with above-average volume. This spike to the upside is quickly pushing shares of SQNS within range of triggering a big breakout trade above some key overhead resistance levels.

Market players should now look for long-biased trades is SQNS if it manages to break out above some key overhead resistance levels at $1.93 to $1.99 a share and then above its 200-day moving average of $2.14 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 88,161 shares. If that breakout hits soon, then SQNS will set up to re-test or possibly take out its next major overhead resistance levels at $2.60 to $2.80 a share, or even $3 a share.

Traders can look to buy SQNS off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $1.72 a share. One can also buy SQNS off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

FuelCell Energy

One under-$10 alternative energy player that's quickly moving within range of triggering a major breakout trade is FuelCell Energy (FCEL), which designs, manufactures, sells, installs, operates, and services stationary fuel cell power plants for distributed baseload power generation. This stock has been on fire so far in 2014, with shares up sharply by 80%.

If you take a glance at the chart for FuelCell Energy, you'll see that this stock gapped up sharply higher on Thursday right above its 50-day moving average of $2.30 a share with strong upside volume flows. This big move to the upside is quickly pushing shares of FCEL within range of triggering a major breakout trade above some key overhead resistance levels. If this breakout triggers, it would also push shares of FCEL above the upper-end of a long consolidation pattern that dates back to March.

Traders should now look for long-biased trades in FCEL if it manages to break out above some key overhead resistance levels at $2.58 to $2.65 a share and then above some past overhead resistance at $2.81 to $2.94 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 6.58 million shares. If that breakout materializes soon, then FCEL will set up to re-test or possibly take out its next major overhead resistance levels at $3.50 to $3.75 a share, or even well north of $4 a share.

Traders can look to buy FCEL off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $2.30 a share or near more key support at $2.24 a share. One can also buy FCEL off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Novavax

Another under-$10 biotechnology player that's starting to move within range of triggering a near-term breakout trade is Novavax (NVAX), which focuses on discovering, developing, and commercializing recombinant protein nanoparticle vaccines and adjuvants. This stock has moving lower over the last six months, with shares off by 18%.

If you look at the chart for Novavax, you'll see that this stock recently formed a double bottom chart pattern at $4.01 to $4.10 a share. Following that bottom, shares of NVAX have started to spike higher and move back above both its 50-day moving average at $4.51 and its 200-day moving average of $4.63 with strong upside volume flows. That move is quickly pushing shares of NVAX within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in NVAX if it manages to break out above some near-term overhead resistance levels at $4.68 to $4.75 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 3.95 million shares. If that breakout begins soon, then NVAX will set up to re-test or possibly take out its next major overhead resistance levels at $5.07 to $5.09 a share, or even $5.20 a share. Any high-volume move above $5.20 a share will then give NVAX a chance to make a run at $5.50 to $6 a share.

Traders can look to buy NVAX off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $4.10 to $4.01 a share. One can also buy NVAX 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.

Cott

One final under-$10 beverages player that's moving very close to triggering a big breakout trade is Cott (COT), which produces beverages on behalf of retailers, brand owners, and distributors worldwide. This stock is off to a slow start in 2014, with shares down by 8.5%.

If you take a glance at the chart for Cott, you'll notice that this stock has been uptrending over the last few weeks, with shares ripping higher from its low of $6.60 to its recent high of $7.42 a share. During that move, shares of COT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of COT within range of triggering a big breakout trade.

Traders should now look for long-biased trades in COT if it manages to break out above some near-term overhead resistance levels at $7.42 to its 200-day moving average of $7.69 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action 321,283 shares. If that breakout kicks off soon, then COT will set up re-test or possibly take out its next major overhead resistance level at $7.80 to $8.20 a share. Any high-volume move above $8.20 will then give COT a chance to tag its next major overhead resistance levels at $8.50 to its 52-week high at $8.74 a share, or $9 a share.

Traders can look to buy COT off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $7.06 a share. One can also buy COT off strength once it starts to push above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

To see more hot under-$10 equities, check out the Stocks Under $10 Setting Up to Explode portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned. Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

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