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 Everyware Global (EVRY), which is exploding higher by 35%; Eltek (ELTK), which is ripping to the upside by 6.9%; (CXDC), which is trending higher by 6.1%; and Ikanos Communications (IKAN), which is moving up by 5.2 %. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
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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.
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Atossa Genetics
One under-$10 health care stock that's starting to trend within range of triggering a major breakout trade is Atossa Genetics (ATOS), which focuses on the development and marketing of cellular and molecular diagnostic risk assessment products for breast cancer in the U.S. This stock has been trending hot over the last three months, with shares up sharply by 42%.
If you take a glance at the chart for Atossa Genetics, you'll see that this stock has been uptrending over the last two months, with shares moving higher from its low of $1.35 to its recent high of around $1.93 a share. During that uptrend, shares of ATOS have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ATOS within range of triggering a major breakout trade above some key near-term overhead resistance levels. Make note that ATOS is also counter-trending higher today while the overall market is pulling back sharply.
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Traders should now look for long-biased trades in ATOS if it manages to break out above some near-term overhead resistance levels at $1.85 to $1.87 a share and then above its 200-day moving average at $1.91 to more key overhead resistance at $1.93 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 469,589 shares. If that breakout gets underway soon, then ATOS will set up to re-test or possibly take out its next major overhead resistance levels at $2.36 to $2.50, or even $3 to $3.28 a share. Any high-volume move above $3.28 will then give ATOS a chance to re-fill some of its previous gap-down-day zone from October that started just above $5 a share.
Traders can look to buy ATOS off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.66 to its 50-day moving average at $1.60 a share or even near $1.58 to $1.50 a share. One can also buy ATOS 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.
FuelCell Energy
Another under-$10 alternative energy player that's starting to trend within range of triggering a big 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 is off to a huge start in 2014, with shares up sharply by 76%.
If you take a look at the chart for FuelCell Energy, you'll notice that this stock is counter-trending higher today vs. the overall market weakness with very strong volume. Volume so far has already registered over 9.9 million shares, which is well above its three-month average volume of 6.32 million shares. This sharp spike to the upside is now quickly pushing shares of FCEL within range of triggering a major breakout trade above some key overhead resistance levels.
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Market players should now look for long-biased trades is FCEL if it manages to break out above some key overhead resistance levels at $2.65 to $2.81 a share and then above $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 action of 6.32 million shares. If that breakout triggers soon, then FCEL will set up to re-test or possibly take out its next major overhead resistance levels at $3.25 to $3.75 a share. Any high-volume move above those levels will then give FCEL a chance to make a run at its 52-week high of $4.74 a share.
Traders can look to buy FCEL off weakness to anticipate that breakout and simply use a stop that sits right around its 50-day moving average of $2.29 a share or near more key support at around $2 a share. One can also buy FCEL 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.
Northern Dynasty Minerals
One under-$10 basic materials player that's starting to move within range of triggering a major breakout trade is Northern Dynasty Minerals (NAK), which is engaged in the acquisition, exploration, and development of mineral properties in the U.S. This stock has been under heavy selling pressure so far in 2014, with shares down sharply by 33%.
If you take a glance at the chart for Northern Dynasty Minerals, you'll see that this stock is bouncing higher today and counter-trending versus the overall market right above its 50-day moving average of 81 cents per share. You'll also see that this stock has been making mostly higher lows over the last three months, which demonstrates that buyers are eager to own shares whenever NAK pulls back. This spike higher today is starting to push shares of NAK within range of triggering a major breakout trade above some key near-term overhead resistance levels.
Traders should now look for long-biased trades in NAK if it manages to break out above some key near-term overhead resistance levels at 89 to 91 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 volume of 153,666 shares. If that breakout materializes soon, then NAK will set up to re-test or possibly take out its next major overhead resistance levels at $1.01 to $1.10 a share. Any high-volume move above those levels will then give NAK a chance to make a run at its next major overhead resistance level at $1.50 a share.
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Traders can look to buy NAK off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at 77 cents to 75 cents per share. One can also buy NAK 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.
Groupon
Another under-$10 stock that's starting to trend within range of triggering a near-term breakout trade is Groupon (GRPN), which operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount worldwide. This stock has been hit hard by the bears so far in 2014, with shares down sharply by 45%.
If you look at the chart for Groupon, you'll see that this stock recently formed a major bottoming chart pattern, since the stock has found buying interest each time it's pulled back to around $6 a share over the last month and change. Shares of GRPN are now starting to spike modestly higher today right above its 50-day moving average of $6.26 a share. This bounce is a counter-trend move versus the overall market weakness and it's beginning to push shares of GRPN within range of triggering a near-term breakout trade above some key overhead resistance levels.
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Market players should now look for long-biased trades in GRPN if it manages to break out above some near-term overhead resistance levels at $6.66 to $7.16 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 16.31 million shares. If that breakout kicks off soon, then GRPN will set up to re-test or possibly take out its next major overhead resistance levels at $7.75 to around $8.50 a share, or even $9 a share. Any high-volume move above $9 will then give GRPN a chance to re-fill some of its previous gap-down-day zone from February that started near $10.50 a share.
Traders can look to buy GRPN off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at around $6 a share. One can also buy GRPN 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.
Liquid Holdings Group
One final under-$10 stock that's trending very close to triggering a near-term breakout trade is Liquid Holdings Group (LIQD), which provides proprietary cloud-based trading and portfolio management solution primarily in the U.S. This stock has been rocked hard by the sellers so far in 2014, with shares down huge by 74%.
If you take a glance at the chart for Liquid Holdings Group, you'll notice that this stock is bounce a bit higher off its intraday low here of $1.68 a share and its moving back above its 50-day moving average of $1.72 a share. This pullback today has so far held near some previous support levels at $1.69 to $1.64 a share. If LIQD can continue to bounce higher and hold those support levels, then this stock has a solid chance to triggering a near-term breakout trade above some key overhead resistance levels.
Traders should now look for long-biased trades in LIQD if it manages to break out above some near-term overhead resistance levels at $1.90 to $1.94 a share and then above more key resistance at $1.98 to $2.20 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 1.44 million shares. If that breakout begins soon, then LIQD will set up re-test or possibly take out its next major overhead resistance levels at $2.75 to $3.50 a share.
Traders can look to buy LIQD off weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support levels at $1.68 to around $1.60 a share. One can also buy LIQD 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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