5 Under-$10 Health Care Stocks Setting Up to Trade Higher

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 Axion Power International (AXPW) , which exploded higher by 39%; Hansen Medical (HNSN) , which ripped higher by 30%; BG Medicine (BGMD) , which soared higher by 25%; and Ku6 Media (KUTV) , which spiked to the upside by 22%. 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.


CareDx

One under-$10 stock that's starting to spike within range of triggering a big breakout trade is CareDx (CDNA) , which develops, markets and delivers a diagnostic surveillance solution for heart transplant recipients to help clinicians make personalized treatment decisions throughout a patient's lifetime. This stock has been hammered lower over the last six months, with shares dropping by 29%.

If you take a glance at the chart for CareDx, you'll notice that this stock spiked higher modestly on Wednesday back above its 50-day moving average in the middle of a sharp market selloff with above-average volume. Volume on the day registered at over 90,000 shares, which is well above its three-month average action of 22,166 shares. That spike is now starting to push shares of CNDA 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 CDNA if it manages to break out above some near-term overhead resistance levels at $7.64 to $7.66 a share and then above $7.91 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 22,166 shares. If that breakout hits soon, then CDNA will set up to re-test or possibly take out its next major overhead resistance levels at $9.50 to $10 a share, or even $11 a share.

Traders can look to buy CDNA off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $6.81 a share or around $6.25 a share. One can also buy CDNA 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.

Genocea Biosciences

Another under-$10 stock that's starting to trend within range of triggering a near-term breakout trade is Genocea Biosciences (GNCA) , which discovers and develops novel vaccines to treat infectious diseases. This stock has been slammed lower over the last six months, with shares dropping sharply by 58%.

If you take a look at the chart for Genocea Biosciences, you'll notice that this stock has been downtrending badly for the last six months, with shares falling from over $16 a share to its recent low of $6.15 a share. During that downtrend, shares of GNCA have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of GNCA have now started to rebound off that $6.15 low and it's beginning to move within range of triggering a near-term breakout trade above some key overhead resistance levels.

Market players should now look for long-biased trades in GNCA if it manages to break out above some near-term overhead resistance levels at $7.79 a share and then above its 50-day moving average of $7.92 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 23,655 shares. If that breakout begins soon, then GNCA will set up to re-test or possibly take out its next major overhead resistance levels at $8.40 to $9 a share, or even $9.25 to $10 a share.

Traders can look to buy GNCA off weakness to anticipate that breakout and simply use a stop that sits right around that recent low of $6.15 a share. One can also buy GNCA 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.

MEI Pharma

One under-$10 oncology player that's starting to move within range of triggering a big breakout trade is MEI Pharma (MEIP) , which focuses on the clinical development of novel therapies for the treatment of cancer. This stock has been drilled by the sellers over the last three months, with shares plunging sharply lower by 52%.

If you take a glance at the chart for MEI Pharma, you'll notice that this stock is attempting to form a major bottoming chart pattern here, since shares have found some buying interest over the last month and change at $3.57 and at $3.61 a share. Shares of MEIP rose modestly higher on Wednesday during the market decline and the stock saw some volume expansion inside of that spike. Volume on the day registered 503,000 shares, which is well above its three-month average action of 261,266 shares. That move is now starting to push shares of MEIP within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in MEIP if it manages to break out above some near-term overhead resistance levels at $3.86 to $4.15 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 261,266 shares. If that breakout develops soon, then MEIP will set up to re-test or possibly take out its next major overhead resistance levels at $4.50 to $4.63 a share, or even its 50-day moving average of $4.94 a share.

Traders can look to buy MEIP off weakness to anticipate that breakout and simply use a stop that sits right below those double bottom support levels at $3.61 to $3.57 a share. One can also buy MEIP off strength once it starts to surge above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Alpha Pro Tech

Another under-$10 medical equipment player that's starting to trend within range of triggering a near-term breakout trade is Alpha Pro Tech (APT) , which is engaged in developing, manufacturing, and marketing a line of disposable protective apparel, building supply products, and infection control products in the U.S. and internationally. This stock has been hit by the sellers over the last three months, with shares dropping sharply lower by 32%.

If you look at the chart for Alpha Pro Tech, you'll see that this stock has been consolidating and trending sideways for the last two months, with shares moving between $2.42 on the downside and $3.05 on the upside. Shares of APT jumped modestly higher on Wednesday during the market selloff and it's now starting to move within range of triggering a near-term breakout trade above the upper-end of its sideways trading chart pattern.

Market players should now look for long-biased trades in APT if it manages to break out above both its 50-day at $2.67 and its 200-day at $2.73 a share and then above more key near-term overhead resistance levels at $ 2.82 to $3.05 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 1.04 million shares. If that breakout materializes soon, then APT will set up to re-test or possibly take out its next major overhead resistance levels at $3.44 to $4 a share, or even $4.23 to $4.50 a share.

Traders can look to buy APT off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.48 to $2.42 a share. One can also buy APT 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.

IGI Laboratories

One final under-$10 health care player that's starting to trend within range of triggering a big breakout trade is IGI Laboratories (IG) , which develops, manufactures and markets topical formulations in the U.S. This stock has ripping incredibly strong over the last six months, with shares soaring higher by a whopping 93%.

If you take a glance at the chart for IGI Laboratories, you'll see that this stock ripped higher on Wednesday during the market decline back above its 50-day moving average of $9.47 a share. That rip the upside is now starting to push shares of IG 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 IG if it manages to break out above some near-term overhead resistance levels at $10.31 to $10.50 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 886,164 shares. If that breakout gets set off soon, then IG will set up re-test or possibly take out its next major overhead resistance level at its 52-week high of $11.28 a share. Any high-volume move above that level will then give IG a chance to hit $12 to $13 a share, or even $14 a share.

Traders can look to buy IG off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $9 or at $8.45 to $8.07 a share. One can also buy IG 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.

-- 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.

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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