5 Stocks Under $10 Set to Soar: Cosan, Gafisa and More

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 Wednesday, including FXCM (FXCM) , which exploded higher by 45%; Life Partners Holdings (LPHI) , which soared higher by 38%; BG Medicine (BGMD) , which ripped to the upside by 29%; and NXT-ID (NXTD) , which jumped to the upside by 24%. 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 ind, here are five stocks under $10 setting up to trade higher.

Ntelos Holdings


One under-$10 wireless communications player that's starting to trend within range of triggering a big breakout trade is Ntelos Holdings (NTLS) , which provides digital wireless communications services to consumers and businesses in Virginia and West Virginia, as well as parts of Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. This stock has been absolutely destroyed over the last three months, with shares smacked lower by a whopping 85%.

If you take a glance at the chart for NTELOS Holdings, you'll notice that this stock has just started to rebound higher off its new 52-week low of $3.85 a share. That rebound has started to take hold as shares of NTLS have tried desperately to form a bottom over the last month, with shares finding some buying interest each time it's traded near or below $4 a share. That rebound is now quickly pushing shares of NTLS within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in NTLS if it manages to break out above some key near-term overhead resistance levels at $4.39 to $4.59 a share and then above more resistance at $5.06 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 of 607,747 shares. If that breakout triggers soon, then NTLS will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $5.72 to its gap-down-day high from last December at around $8 a share.

Traders can look to buy NTLS off weakness to anticipate that breakout and simply use a stop that sits right below its new 52-week low of $3.85 a share. One can also buy NTLS off strength once it starts to clear those those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

China Recycling Energy


Another under-$10 stock that's starting to trend within range of triggering a big breakout trade is China Recycling Energy (CREG) , which is engaged in the recycling energy business primarily in the People's Republic of China. This stock has been slammed lower over the last three months, with shares down large by 43%.

If you take a look at the chart for China Recycling Energy, you'll notice that this stock has been downtrending badly for the last three months, with shares sliding sharply lower from its high of $1.59 to its new 52-week low of 65 cents per share. During that downtrend, shares of CREG have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of CREG have now started to stabilize and move sideways over the last month, with shares moving between 65 cents on the downside and 84 cents on the upside. Shares of CREG are now starting to bounce off some near-term support near 70 cents per share and it's beginning to trend within range of triggering a big breakout trade above the upper end of its sideways trading chart pattern.

Market players should now look for long-biased trades in CREG if it manages to break out above some key near-term overhead resistance levels at 79 to 84 cents per 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 95,671 shares. If that breakout develops soon, then CREG will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of 96 cents per share or even $1.10 to $1.20 a share.

Traders can look to buy CREG off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at 70 cents per share or near its new 52-week low of 65 cents per share. One can also buy CREG 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.

Midstates Petroleum Company


One under-$10 energy player that's starting to trend within range of triggering a big breakout trade is Midstates Petroleum Company (MPO) which is engaged in the exploration, development and production of oil, natural gas liquids and natural gas in the U.S. This stock has been smoked by the sellers over the last six months, with shares plunging lower by a whopping 79%.

If you take a glance at the chart for Midstates Petroleum Company, you'll notice that this tock has been downtrending badly over the last six months, with shares moving sharply lower from its high of $7.13 to its new 52-week low of $1.05 a share. During that downtrend, shares of MPO have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of MPO have now attempting to carve out a bottom over the last month, with shares finding buying interest at $1.25, $1.15 and $1.17 a share. This stock is now starting to rebound off those support levels and it's beginning to move within range of triggering a big breakout trade above a key descending downtrend line.

Traders should now look for long-biased trades in MPO if it manages to break out above some near-term overhead resistance levels at $1.42 to $1.50 a share and then above $1.63 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 volume of 825,698 shares. If that breakout materializes soon, then MPO will set up to re-test or possibly take out its next major overhead resistance levels at $1.88 to its 50-day moving average of $1.91 a share, or even $2.20 to $2.50 a share.

Traders can look to buy MPO off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.17 to $1.15 a share. One can also buy MPO 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.

Cosan


Another under-$10 energy stock that's quickly moving within range of triggering a big breakout trade is Cosan (CZZ) , which is engaged in sugar and ethanol, fuel, logistics services, lubricants and piped natural gas businesses primarily in Brazil, rest of South America, Europe, the Middle East, Asia and North America. This stock has been hammered lower over the last six months, with shares dropping sharply lower by 41%.

If you look at the chart for Cosan, you'll see that this was smacked lower from its last September high of $14.57 to its new 52-week low of $6.06 a share. During that downtrend, shares of CZZ have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of CZZ have now started to possibly form a trend reversal chart pattern, since this stock has been moving higher over the last month, with shares trading up from $6.06 low to its recent high of $7.93 a share. That move has now pushed shares of CZZ within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Market players should now look for long-biased trades in CZZ if it manages to break out above some key near-term overhead resistance levels at $7.93 to its 50-day moving average of $7.96 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 of 1.89 million shares. If that breakout gets started soon, then CZZ will set up to re-test or possibly take out its next major overhead resistance levels at $9 to $10.14 a share, or even its 200-day moving average of $11.05 a share.

Traders can look to buy CZZ off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $6.55 or around its new 52-week low of $6.06 a share. One can also buy CZZ 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.

Gafisa


One final under-$10 stock that's starting to trend within range of triggering a big breakout trade is Gafisa (GFA) , which operates as a homebuilder in Brazil. This stock has been annihilated by the bears over the last six months, with shares dropping sharply lower by 51%.

If you take a glance at the chart for Gafisa, you'll see that this stock has been downtrending badly for the last five months with shares dropping sharply lower from its high of $3.09 to its new 52-week low of $1.33 a share. During that downtrend, shares of GFA have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of GFA have now started to form a trend reversal chart pattern and this stock is quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels. Shares of GFA also started to spike higher on Wednesday within range of those breakout levels with strong upside volume flows.

Traders should now look for long-biased trades in GFA if it manages to break out above some near-term overhead resistance levels at $1.61 to $1.66 a share and then above its 50-day moving average of $1.69 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 1 million shares. If that breakout triggers soon, then GFA will set up re-test or possibly take out its next major overhead resistance levels at $2 to $2.09 a share, or even $2.24 a share.

Traders can look to buy GFA off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $1.43 to its new 52-week low of $1.33 a share. One can also buy GFA 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.

-- 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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