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.
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Just take a look at some of the big movers in the under-$10 complex from Friday, including Emerson Radio (MSN), which is exploding higher by 28%; MGT Capital Investments (MGT), which is surging higher by 20%; Digital Ally (DGLY), which is ripping higher by 19%; and Heat Biologics (HTBX), which is jumping to the upside by 16.7%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
One example of an under-$10 stock I flagged recently that exploded to the upside was China Finance Online (JRJC), which I featured in July 24's "5 Stocks Under $10 Set to Soar" at around $4.27 per share. I mentioned in that piece that shares of China Finance Online were just starting to flirt with a breakout trade, since the stock was starting to challenge some near-term overhead resistance at $4.28 a share. That action was starting to push shares of JRJC within range of triggering a much bigger breakout trade above some key near-term overhead resistance levels
Guess what happened? Shares of China Finance Online finally triggered that breakout early this week with monster upside volume flows. Volume on Monday registered 11.87 million shares and on Tuesday it hit 32.76 million shares, which is well above its three-month average volume of 1.84 million shares. Shares of JRJC have exploded to the upside since clearing some key near-term overhead resistance levels at $ 4.75 to $5.10 a share with the stock tagging an intraday high on Thursday at $11.88 a share. That represents a monster gain of well over 100% for anyone who bought the stock in anticipation of that breakout following my original article.
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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Nova Lifestyle
One under-$10 consumer goods player that's starting to trend within range of triggering a big breakout trade is Nova Lifestyle (NVFY), which designs, manufactures, markets and sells residential furniture for middle and upper middle-income consumers worldwide. This stock has been hit hard by the bears over the last six months, with shares down sharply by 38%.
If you take a glance at the chart for Nova Lifestyle, you'll notice that this stock has been trending sideways and consolidating for the last two months, with shares moving between $4.02 on the downside and $4.88 on the upside. Shares of NVFY have now started to trend back above its 50-day moving average of $4.34 a share and it's quickly moving within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.
Traders should now look for long-biased trades in NVFY if it manages to break out above some near-term overhead resistance levels at $4.43 to $4.55 a share and then once it clears more resistance at $4.69 to $4.88 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 79,155 shares. If that breakout gets set off soon, then NVFY will set up to re-test or possibly take out its next major overhead resistance levels $5.20 to $6 a share.
Traders can look to buy NVFY off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $4.15 to $4.02 a share. One can also buy NVFY 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.
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MobileIron
Another stock that's starting to trend within range of triggering a near-term breakout trade is MobileIron (MOBL), which develops and provides an information technology platform for enterprises to secure and manage mobile applications, content, and devices. This stock is off to a bearish start in 2014, with shares off by 16.5%.
If you take a look at the chart for MobileIron, you'll notice that this stock recently formed a double bottom chart pattern at $8.20 to $8.30 a share. Following that bottom, shares of MOBL have started to spike higher and the stock broke out above some near-term overhead resistance at $9.07 a share. That move is quickly pushing shares of MOBL within range of triggering a much bigger breakout trade above some key near-term overhead resistance.
Market players should now look for long-biased trades is MOBL if it manages to break out above some near-term overhead resistance at $9.60 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 638,624 shares. If that breakout triggers soon, then MOBL will set up to re-test or possibly take out its next major overhead resistance levels at $11.11 to its all-time high at $11.74 a share.
Traders can look to buy MOBL off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support levels at $8.30 to $8.20 a share. One can also buy MOBL 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.
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Provectus Biopharmaceuticals
One under-$10 development-stage biopharmaceutical player that's quickly moving within range of triggering a major breakout trade is Provectus Biopharmaceuticals (PVCT) which is engaged in developing pharmaceuticals for oncology and dermatology indications. This stock has been hammered by the sellers over the last three months, with shares down sharply by 53%.
If you take a glance at the chart for Provectus Biopharmaceuticals, you'll see that this stock has formed a major bottoming chart pattern over the last two months and change, with shares finding buying interest whenever it pulls back close to 80 cents per share. This stock is now starting to spike higher off those support levels and it's flirting with its 50-day moving average at 94 cents per share. That move is quickly pushing shares of PVCT within range of triggering major breakout trade above some key near-term overhead resistance levels.
Traders should now look for long-biased trades in PVCT if it manages to break out above some near-term overhead resistance levels at $1.06 to $1.09 a share and then above some past resistance at $1.17 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 1.43 million shares. If that breakout materializes soon, then PVCT will set up to re-test or possibly take out its next major overhead resistance level at $1.45 a share. Any high-volume move above $1.45 will then give PVCT a chance to re-fill some of its previous gap-down-day zone from May that started at $2 a share.
Traders can look to buy PVCT off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at 82 cents per share. One can also buy PVCT 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.
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Galectin Therapeutics
Another under-$10 healthcare player that's starting to move within range of triggering a near-term breakout trade is Galectin Therapeutics (GALT), which is engaged in the research and development of therapies for fibrotic disease and cancer. This stock has been destroyed over the last six months by the bears, with shares down a whopping 66%.
If you look at the chart for Galectin Therapeutics, you'll see that this stock recently gapped down sharply lower from over $16 to $5.15 a share with heavy downside volume flows. Following that move, shares of GALT have continued to slide lower with the stock hitting a new 52-week low at $4.28 a share. That said, shares of GALT have now started to rebound off that $4.28 low and it's quickly moving within range of triggering a near-term breakout trade and a possible rebound trader off oversold levels.
Market players should now look for long-biased trades in GALT if it manages to break out above some near-term overhead resistance levels at $5.38 to $5.68 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 655,747 shares. If that breakout kicks off soon, then GALT will set up to re-test or possibly take out its next major overhead resistance levels at $7 to right around $8 a share. Any high-volume move above $8 will then give GALT a chance to re-fill some of its previous gap-down-day zone from July that started near $16 a share.
Traders can look to buy GALT off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $4.40 to its 52-week low at $4.28 a share. One can also buy GALT 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.
Dehaier Medical Systems
One final under-$10 stock that's trending very close to triggering a big breakout trade is Dehaier Medical Systems (DHRM), which develops and distributes medical devices, and sleep respiratory and oxygen therapy products in the People's Republic of China. This stock has been sold off hard over the last six months, with shares sliding sharply lower by 45%.
If you take a glance at the chart for Dehaier Medical Systems, you'll notice that this stock recently formed a double bottom chart pattern at $5.02 to $5.07 a share. Following that bottom, shares of DHRM have started to move slightly higher and the stock is just starting to challenge its 50-day moving average of $5.47 a share. That move is quickly pushing shares of DHRM within range of triggering a big breakout trade above some key overhead resistance levels.
Traders should now look for long-biased trades in DHRM if it manages to break out above some near-term overhead resistance levels at $5.90 to around $6 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 108,205 shares. If that breakout gets started soon, then DHRM will set up re-test or possibly take out its next major overhead resistance levels at $7.08 to $7.15 a share, or even $8 to $8.66 a share.
Traders can look to buy DHRM off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $5.24 or at $5.07 to $5.02 a share. One can also buy DHRM off strength once it starts to blast 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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