BALTIMORE (Stockpickr) -- Sometimes, big things come in small packages. That's true of stock trades too.
As I write, some of the most interesting upside trading setups are showing up in stocks that trade for $15 or less. Those low-priced stocks come with higher volatility -- both up and down. And by filtering out the high-probability upside setups, you can supercharge your portfolio at the same time that many investors are getting ready for a boring, range-bound market this summer.
Just so we're clear, a low share price doesn't necessarily mean that we're talking about a small company, or even a "cheap" one by valuation standards. In fact, by itself, share price isn't a very useful metric at all. But it's true that lower-priced stocks do tend to trade more actively than pricier stocks of similar market capitalization. And when stocks under $15 start making moves, the gains can be substantial on a percentage basis.
That's why we're taking this technical look at five under-$15 stocks today.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Without further ado, let's take a look at five technical setups worth trading now.
Navios Maritime Partners
Up first on our list is Navios Maritime Partners (NMM), a small-cap deep sea freight stock. Navios has had a pretty awful year, shedding some 40% of its share price in the last 12 months. But long-suffering shareholders could be in store for a reprieve here. NMM looks bullish in the long-term.
Navios is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance up above shares (in this case at $13) and uptrending support to the downside. Basically, as NMM bounces in between those two technically significant price levels, it's been getting squeezed closer and closer to a breakout above our $13 price ceiling. When that happens, we've got a buy signal.
Typically, the ascending triangle is a continuation pattern. It comes after an uptrend, not at the end of a downtrend. But even though our setup in NMM isn't textbook, that doesn't change the trading implications here. A breakout above $13 means "buy."
Momentum, measured by 14-day RSI, adds some extra confidence to the upside trade in Navios Maritime. That's because NMM's price momentum has been making higher lows going back to last fall, providing confirmation that buying pressure is building here.
Still, it's crucial to be reactionary here. Don't try to get in ahead of a move higher. NMM isn't a high-probability trade until $13 gets taken out.
We're seeing pretty much the exact same setup in shares of $18 billion mobile carrier Sprint (S). Just like Navios, Sprint is forming an ascending triangle after being sold off pretty hard over the course of the last year. For Sprint, the breakout level to watch is resistance up at $5.50.
Why all of that significance at that $5.50 level? It all comes down to buyers and sellers. Price patterns, like this ascending triangle pattern in Sprint, are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for Sprint's stock.
The $5.50 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $5.50 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level.
It's important to be reactionary on this trade. Just like with NMM, don't buy Sprint until buyers are able to shove this stock above resistance.
If you've owned small-cap biopharmaceutical stock Amicus Therapeutics (FOLD) this year, then you're probably pretty happy. After all, shares are up more than 47% since the calendar flipped to January, as Amicus took full advantage of the broad rally in the biopharma industry.
But don't worry if you missed the move. FOLD looks ready for a second leg higher in June.
Amicus Therapeutics is currently forming a rounding bottom pattern, a bullish price setup that looks just like it sounds. The rounding bottom indicates a gradual transition in control from sellers to buyers -- and while it's typically a reversal pattern that comes at the bottom of a down-move, FOLD is another low-priced stock with a not-so-textbook price pattern. Just like with the other two trades, the breakout implications aren't any different here.
The buy signal comes on a breakout above $12.50 resistance. That $12.50 level is the price ceiling that's been swatting shares of FOLD lower since March. Once the breakout happens, I'd recommend parking a protective stop at the 50-day moving average. That level has been acting like a good proxy for support lately.
Large Spanish bank Banco Santander (SAN) is another low-priced stock that looks bullish here -- and the good news is that you don't need to be an expert technical trader to figure out why. In fact, the price action in shares is about as simple as it gets. Here's how to trade it.
Santander has been making its way higher in an uptrending channel since January, bouncing on each test of trend line support. That channel is formed by a pair of parallel trend lines that identify the high-probability range for shares of SAN to stay within. Put another way, every test of the bottom of the channel has been a low-risk, high-reward opportunity to get into Santander, and as shares test support for a fourth time now, it makes sense to buy the next bounce higher.
We could see that buy signal get confirmed in today's session – SAN is testing support here. If you decide to buy the bounce, it makes sense to park a stop under this stock's prior swing low at $6.75.
Last on our list of low-priced trades is J.C. Penney (JCP). This department store retailer is showing traders an uptrend just like the one in SAN, and as shares test support this week, the next bounce is our buy signal. Why bother waiting?
Waiting for that bounce is important for two key reasons: It's the spot where shares have the most room to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before the channel breaks, and you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for this bounce to happen first, you're ensuring JCP can actually still catch a bid along that line before you put your money on shares.
Relative Strength, (not to be confused with RSI) adds some extra evidence to the upside in J.C. Penney. That's because relative strength has been in an uptrend of its own since shares bottomed last December, which confirms that this stock isn't just moving higher -- it's also outperforming the rest of the market long-term.
As long as that relative strength uptrend remains intact, expect JCP to keep beating the rest of the market too.