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.
Just take a look at some of the hot movers in the under-$10 complex from Thursday, including Oclaro (OCLR), which skyrocketed higher by 40%; GenVec (GNVC), which soared higher by 33%; Ivanhoe Energy (IVAN), which ripped higher by 18%; and CAMAC Energy (CAK), which trended up 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.
One low-priced stock that recently skyrocketed higher was pharmaceuticals player Neuralstem (CUR), which I highlighted in Sept. 06's "5 Stocks Setting Up to Break Out" at $1.80 per share. I mentioned in that piece that shares of CUR were uptrending strong over the last six months, with the stock soaring higher from its low $1 a share to its high of $1.79 a share. Shares of CUR had recently pulled back to its 50-day moving average at $1.59 a share, and the stock was starting to bounce strongly off that level. That move was quickly spiking shares of CUR within range of triggering a big breakout trade above some near-term overhead resistance levels at $1.75 to $1.79 a share.
Guess what happened? Shares of CUR didn't wait long to trigger that breakout, since the stock closed the same day I wrote that piece at $1.85 a share. That close was also accompanied by heavy upside volume, which was bullish technical price action. Shares of CUR continued to surge higher the next two trading sessions, with the stock hitting a new 52-week high of $2.52 a share. That's a massive gain of close to 40% in just a few trading sessions for anyone who played that breakout. I don't think CUR is done going higher here either, so traders should look for more upside in this stock if it can manage to take out $2.38 to its 52-week high at $2.52 a share with strong upside volume.
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.
I'm not as eager to recommend investing long-term in stocks that trade less than $10 a share because these names can be very speculative, and the odds for picking the long-term winners aren't great. But I definitely love to trade stocks that are priced below $10. I like to view them as a trading vehicle with lots of volatility and lots of upside when the trade is timed right.
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.
Durect
One under-$10 name that's starting to move within range of triggering a major breakout trade is Durect (DRRX), which develops pharmaceutical products based on its proprietary drug delivery technology platforms. This stock is off to a hot start in 2013, with shares up sharply by 41%.
If you take a look at the chart for Durect, you'll notice that this stock has been trending sideways for the last two months and change, with shares moving between $1 on the downside and $1.34 on the upside. Shares of DRRX have now started to flirt with that $1.34 major resistance level on Thursday, since the stock has hit an intraday high of $1.35 a share with strong upside volume flows. This could be signaling that shares of DRRX are ready to break out above the upper-end of its recent range and trend substantially higher.
Traders should now look for long-biased trades in DRRX if it manages to break out above some near-term overhead resistance levels at $1.34 to $1.35 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 679,480 shares. If that breakout triggers soon, then DRRX will set up to re-fill some of its previous gap down zone from May that started near $1.80 a share. If DRRX gets into that gap with volume, then this stock could easily trend north of $2 a share.
Traders can look to buy DRRX off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at its 50-day moving average of $1.16 a share or its 200-day moving average at $1.11 a share. One can also buy DRRX off strength once it clears those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.
Echo Therapeutics
Another under-$10 health care player that's quickly moving within range of triggering a major breakout trade is Echo Therapeutics (ECTE), which is a transdermal medical device company with skin permeation technology. This stock has been destroyed by the bears so far in 2013, with shares off huge by 70%.
If you take a look at the chart for Echo Therapeutics, you'll notice that this stock has been uptrending strong for the last month, with shares moving higher from its low of $2.14 to its intraday high of $3.06 a share. During that uptrend, shares of ECTE have been consistently making higher lows and higher highs, which is bullish technical price action. That move has pushed shares of ECTE back above its 50-day moving average at $2.65 a share, and it's just starting to push ECTE into breakout territory, since the stock has cleared some key near-term overhead resistance levels at $2.98 to $2.99 a share. That move is quickly pushing shares of ECTE within range of triggering an even bigger breakout trade.
Market players should now look for long-biased trades in ECTE if it manages to break out above some major near-term overhead resistance at $3.30 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average volume of 211,103 shares. If that breakout triggers soon, then ECTE will set up to re-test or possibly take out its next major overhead resistance levels at $4 to $4.50 a share, or possibly even $5 to $6 a share.
Traders can look to buy ECTE off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day at $2.65 a share, or right below more near-term support at $2.50 a share. One can also buy ECTE off strength once it clears $3.30 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.
EnteroMedics
One under-$10 health care player that's starting to trend within range of triggering a big breakout trade is EnteroMedics (ETRM), which is engaged in design and development of devices that use neuroblocking technology to treat obesity, its associated co-morbidities and other gastrointestinal disorders. This stock has been hit hard by the sellers so far in 2013, with shares off sharply by 59%.
If you take a look at the chart for EnteroMedics, you'll notice that this stock recently formed a double bottom chart pattern $1 to $1.01 a share. Following that bottom, shares of ETRM have started to rip higher and trend back above its 50-day moving average at $1.08 a share with strong upside volume flows. This move is quickly pushing ETRM within range of triggering a big near-term breakout trade.
Traders should now look for long-biased trades in ETRM if it manages to break out above some near-term overhead resistances levels at $1.14 to $1.19 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 action of 584,986 shares. If that breakout triggers soon, then ETRM will set up to re-test or possibly take out its next major overhead resistance levels at $1.37 to $1.47 a share. Any high-volume move above those levels will then give ETRM a chance to re-fill some of its previous gap down zone from February that started above $3 a share.
Traders can look to buy ETRM off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $1.08 a share, or below more key near-term support at $1 a share. One can also buy ETRM off strength once it takes out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.
Tsakos Energy Navigation
Another under-$10 name in the energy space that's starting to move within range of triggering a near-term breakout trade is Tsakos Energy Navigation (TNR), which is a provider of seaborne crude oil and petroleum product transportation services. This stock has been on fire so far in 2013, with shares up sharply by 35%.
If you take a look at the chart for Tsakos Energy Navigation, you'll notice that this stock just recently formed a double bottom chart pattern at $4.50 to $4.55 a share. Following that bottom, shares of TNP have started to uptrend and move back above its 50-day moving average of $4.85 a share. That move is quickly pushing shares of TNP within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in TNP if it manages to break out above some near-term overhead resistance levels at $5.09 to $5.15 a share and then once it takes out more resistance at $5.69 to its 52-week high at $6.19 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 action of 184,898 shares. If that breakout triggers soon, then TNP will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $7 to $8.30 a share.
Traders can look to buy TNP off weakness to anticipate that breakout and simply use a stop that sits right below those key near-term support levels at $4.55 to $4.50 a share. One can also buy TNP off strength once it clears those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.
IntelliPharmaCeutics International
One final under-$10 pharmaceuticals player that potentially looks ready to trend significantly higher IntelliPharmaCeutics International (IPCI), which business activities include research, development, and commercialization of controlled-release and targeted pharmaceutical products.. This stock has been under selling pressure so far in 2013, with shares off by 19.6%.
If you take a look at the chart for the IntelliPharmaCeutics International, you'll notice that this stock has sold off from its August high of $2.39 a share to its recent low of $1.81 a share. That selloff did not take shares of IPCI to a lower low, which would have only occurred if the stock broke below $1.76 a share. Shares of IPCI have now started to trend back above its 50-day moving average at $1.95 a share and its flirting here with its 200-day moving average at $2.01 a share. That move is starting to push shares of IPCI within range of triggering a big breakout trade.
Traders should now look for long-biased trades in IPCI if it manages to break out above some near-term overhead resistance levels at $2.20 to $2.39 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 175,680 shares. If that breakout triggers soon, then IPCI will set up to re-test or possibly take out its next major overhead resistance levels at $2.80 to its 52-week high at $3.72 a share.
Traders can look to buy IPCI off weakness to anticipate that breakout and simply use a stop that sits right below its recent low of $1.81 a share. One can also buy PCI off strength once it clears 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.
RELATED LINKS: >>5 Tech Stocks Spiking on Big Volume>>5 Stocks Setting Up to Break Out
>>4 Red-Flag Stocks to Sell This Fall
Follow Stockpickr on Twitter and become a fan on Facebook.
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.
No comments:
Post a Comment