Delafield, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for $10 a share or less 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.
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Just take a look at some of the hot movers in the under-$10 complex today, including Seanergy Maritime (SHIP), which is exploding higher by over 20%; Unwired Planet (UPIP), which is soaring higher by 16%; Supercom (SPCB), which is ripping to the upside by 14%; and Northwest Biotherapeutics (NWBO), which is surging to the upside by 12%. 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.
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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.
Verso Paper
One under-$10 consumer goods player that's quickly moving within range of triggering a big breakout trade is Verso Paper (VRS), which produces and sells coated papers in the U.S. This stock has been on fire over the last six months, with shares up huge by 248%.
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If you take a glance at the chart for Verso Paper, you'll notice that this stock recently formed a double bottom chart pattern at $1.96 to $2 a share. Following that bottom, shares of VRS have started to uptrend and the stock is now moving back above its 50-day moving average of $2.63 a share. Shares of VRS are spiking sharply higher today and the stock is quickly moving within range of triggering a big breakout trade.
Traders should now look for long-biased trades in VRS if it manages to break out above some near-term overhead resistance levels at $2.98 to $3 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 809,046 shares. If that breakout triggers soon, then VRS will set up to re-test or possibly take out its next major overhead resistance levels at $3.32 to $3.40 a share. Any high-volume move above those levels will then give VRS a chance to tag $4 to $4.50 a share.
Traders can look to buy VRS off weakness to anticipate that breakout and simply use a stop that sits right around some near-term support levels at $2.50 to $2.30 a share. One can also buy VRS 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.
ChinaNet Online
An under-$10 technology player that's starting to trend within range of triggering a near-term breakout trade is ChinaNet Online (CNET), which provides business-to-businesses Internet services for small and medium enterprise sales networks in the People's Republic of China. This stock is off to a monster start in 2014, with shares up sharply by 91%.
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If you take a look at the chart for ChinaNet Online, you'll notice that this stock is starting to form a major bottoming chart pattern, since shares are finding buying interest each time it pulls back to around $1.55 to $1.50 a share. Shares of CNET have been trending sideways for the last few weeks, with shares moving between around $1.54 on the downside and $1.90 on the upside. This stock is currently trending near the bottom of its range, but shares of CENT are starting to uptrend and 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 CNET if it manages to break out above some near-term overhead resistance at $1.90 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 247,174 shares. If that breakout gets set off soon, then CNET will set up to re-test or possibly take out its next major overhead resistance levels at $2.14 a share or even its 52-week high at $2.75 a share.
Traders can look to buy CNET off weakness to anticipate that breakout and simply use a stop that sits right below $1.50 a share. One can also buy CNET 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.
Sprint
One under-$10 telecommunications player that's starting to move within range of triggering a near-term breakout trade is Sprint (S), which provides wireless and wireline communications services to consumers, businesses, and government users in the U.S., Puerto Rico and the U.S. Virgin Islands. This stock has been in play with the bulls over the last six months, with shares surging higher by 50%.
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If you consult the chart for Sprint, you'll see that this stock has been uptrending strong over the last two months, with shares moving higher from its low of $7.42 to its recent high of $9.46 a share. During that uptrend, shares of S have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of S are spiking higher today and that spike is quickly pushing the stock within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in S if it manages to break out above some key overhead resistance levels at $9.46 to $10.19 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 19.40 million shares. If that breakout gets underway soon, then S will set up to re-test or possibly take out its 52-week high at $11.47 a share. Any high-volume moves above $11.47 a share will then give S a chance to tag $13 to $14 a share.
Traders can look to buy S off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $8.61 a share or near more support at $8.40 to $8.15 a share. One can also buy S off strength once it starts to bust above those key resistance levels volume and then simply use a stop that sits a comfortable percentage from your entry point.
J.C. Penney
Another under-$10 department store player that's starting to push within range of triggering a big breakout trade is J.C. Penney (JCP), which sells merchandise through department stores in the U.S. This stock has been rocking to the upside over the last month, with shares up sharply by 20%.
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If you take a glance at the chart for J.C. Penney, you'll notice that this stock recently gapped up sharply higher from just under $5.50 a share to over $7.50 a share with monster upside volume. Following that move, shares of JCP have continued to uptrend with the stock hitting a recent high of $9.28 a share. Shares of JCP briefly pulled back to its recent low of $8.13 a share, but now the stock is back on the upswing and quickly moving within range of triggering a big breakout trade.
Market players should now look for long-biased trades in JCP if it manages to break out above some key near-term overhead resistance levels at $9.25 to $9.28 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 29.48 million shares. If that breakout starts soon, then JCP will set up to re-test or possibly take out its next major overhead resistance levels at $10.30 a share to its 200-day moving average of $10.44 a share. Any high-volume move above those levels will then give JCP a chance to tag $12 to $13 a share.
Traders can look to buy JCP off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $8.50 or at $8.13 a share. One can also buy JCP 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.
Intermolecular
One final under-$10 technology player that's starting to trend within range of triggering a major breakout trade is Intermolecular (IMI), which develops and applies high productivity combinatorial research and development technologies for the semiconductor and clean energy industries This stock has been hammered by the bears so far in 2014, with shares off sharply by 40%.
If you take a look at the chart for Intermolecular, you'll see that this stock recently gapped down sharply from over $3.75 to $2.75 a share with heavy downside volume. Following that move, shares of IMI have started to rebound and uptrend, with the stock moving higher from its low of $2.55 to its intraday high of $2.98 a share. This stock is now quickly moving 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 IMI if it manages to break out above some near-term overhead resistance levels at $3 a share to its gap-down-day high of $3.25 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 325,726 shares. If that breakout materializes soon, then IMI will set up to re-fill some of its previous gap-down-day zone that started just above $3.75 a share.
Traders can look to buy IMI off weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support levels at $2.70 to $2.55 a share. One can also buy IMI 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.
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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