WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street where stocks trading near or 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 hot movers today in the under-$10 complex, including Threshold Pharmaceuticals (THLD), exploding higher by over 80%; TeleCommunications (TSYS), soaring over 17%; Silicon Image (SIMG), surging over 17%; and EntreMed (ENMD) trading up over 17%. You don’t even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

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.

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    Here’s a look at a number of under-$10 stocks that look poised to potentially trade higher from current levels.

    Power-One

    One under-$10 stock that’s starting to trigger a big breakout trade today is Power-One (PWER). This company is a designer and manufacturer of inverters for the renewable energy industry. This stock is on fire so far in 2012 with shares up over 30%.

    If you take a look at the chart for Power-One, you’ll notice that this stock had been stuck in a downtrend that took it from its September high of $7.53 to a recent low print of $3.68 a share. After the stock hit that low, it found some big buying support and changed its trend and soared higher. Now Power-One is starting to trigger a big breakout trade with the stock moving above some near-term overhead resistance levels.

    Traders should now watch PWER for a sustained high-volume move and close above some near-term overhead resistance at $5.02 to $5.07 a share. At last check, the stock has already cleared those levels intraday and volume is tracking in extremely strong. Volume has gone over 7 million shares which is well above its three-month average volume of 2.3 million shares. If we can get a strong close in PWER, then traders should target a move back toward its next significant overhead resistance at $6 to $6.28 (200-day), or possibly even higher.

    One could be a buyer of PWER off any notable weakness and simply use a mental stop that’s a few percentage points below the breakout levels of $5.02 to $5.07 a share. I would only add to any long positions if PWER eventually takes out its 200-day moving average of $6.28 with high-volume.

     

    Meritor

    Another under-$10 stock that’s starting to trigger a big breakout trade is Meritor (MTOR). This company is engaged in providing drivetrain mobility and braking solutions for original equipment manufacturers of trucks, trailers and specialty vehicles, as well as the related aftermarkets in the transportation and industrial sectors. This stock is killing the shorts in 2012 with shares up over 40% so far on the year.

    If you take a look at the chart for Meritor, you’ll notice that this stock was in the control of the bears when it dropped from its October high of $10.31 to a recent low of $4.80 a share on monster volume. After that giant selloff, the stock has completely changed its trend and entered an uptrend with shares consistently making higher highs and higher lows, which is bullish price action. Now shares of MTOR are starting to trigger a big breakout on heavy volume.

    Market players should keep an eye on MTOR for a sustained high-volume move and close above some near-term overhead resistance at $7.25 share. At last check, the stock has already trended above that level intraday, and the volume is tracking in very strong. Volume so far today is over 2.6 million shares, which is well above its three-month average action of 2.29 million shares. If this breakout is the real deal, then traders should target a move higher in MTOR back towards $8.50 to $10.28 (200-day) a share, or possibly much higher.

    One could now be a buyer of MTOR off any noticeable weakness and simply use a mental stop that’s a few percentage points below that breakout level of $7.25. You could also use a stop that’s a bit lower at around today’s low of $6.75 a share. If this breakout is the real deal, then getting long into some weakness should lead to some hefty profits in the near future.

    Netlist

    One under-$10 name in the semiconductor space that’s quickly approaching a major breakout trade is Netlist (NLST). This company designs, manufactures and sells memory subsystems for datacenter server and high-performance computing and communications markets. This stock is off to a monster start in 2012 with shares up around 40%.

    If you take a look at the chart for Netlist, you’ll see that this stock has been uptrending ridiculously strong since it hit its October low of $1.04 a share. Since hitting that low, the stock has been marching higher and making mostly higher lows and higher highs, which is bullish price action. Now shares of NLST are gearing up to trigger a big breakout trade if the stock can manage to clear some near-term overhead resistance levels.

    Market players should keep an eye on NLST for a breakout trade to trigger above some near-term overhead resistance at $3.85 to $3.96 on heavy volume. Look for a sustained high-volume move and close above those levels to signal that this stock wants to trend significantly higher. Watch for volume that’s near or well above its three-month average action of 854,444 shares. If we get that action soon, then look for NLST to make a run at its next significant overhead resistance levels near $5 to $6 a share.

    One could be a buyer of this stock off any notable weakness and simply anticipate the breakout. I would use a mental stop just below some near-term support at $3.25 a share, or down around $3 a share if you want to give it more room. I would then add to any long positions once $3.85 to $3.96 is taken out with high-volume.

    Central European Media

    One under-$10 name in the broadcasting and cable complex that’s trading very close to a key breakout level is Central European Media (CETV). This is a media company operating broadcasting, Internet and television content businesses in seven Central and Eastern European countries with an aggregate population of approximately 97 million people. This stock is off to a short start in 2012 with shares up over 25% so far on the year.

     

    If you take a look at the chart for Central European Media, you’ll see that this stock was whacked by the sellers from its October high of $12.34 to a recent low of $5.89 a share. After tagging that low, the stock has started to turn around and trend higher with a number of up days registering monster volume. Now CETV is getting very close to trading above some near-term overhead resistance that will trigger a breakout trade.

    If you’re bullish on CETV, then one could be a buyer of this stock on a sustained high-volume move and close above some near-term overhead resistance at $8.70 a share. Look for volume that’s near or well above its three-month average action of 447,902 shares. If that breakout triggers soon, then look for CETV to trend back towards $10.50 to $11.00 a share, or possibly much higher.

    One could be a buyer of CETV off any notable weakness and simply anticipate the breakout. I would look to use a mental stop at around $8 to $7.50 a share, depending on your risk tolerance. I would then add to any long positions if $8.70 gets taken out with volume. You could also just wait for the breakout to trigger and buy off strength once $8.70 is taken out with high-volume.

    Western Copper and Gold

    One final under-$10 stock that’s getting very close to breaking out here is Western Copper and Gold (WRN). This company engages in the acquisition and exploration of copper and other mineral properties in Canada. This stock has been ripping higher in 2012 with shares up over 25% so far.

    If you take a look at the chart for Western Copper and Gold, you’ll notice that this stock has been trading range bound for the past couple of months and change, between $1.37 and $1.98 a share. A high-volume move outside of that range should set this stock up for its next major trend. Over the last few weeks, the up volume has been expanding dramatically as the stock approaches a breakout above some near-term overhead resistance.

    Market players should now watch WRN for a breakout trade if this stock can manage to sustain a high-volume move and close above some near-term overhead resistance at $1.98 a share. Look for volume on any move and a

    close above $1.98 that registers near or well above its three-month average volume of 64,647 shares. If we get that action soon, then target a big spike higher in WRN back towards $2.50 to $2.61 (200-day) a share, or possibly much higher.

    If you’re bullish on WRN, look to buy this stock off of weakness and simply use a mental stop below or round $1.80 a share. You could also just wait for the breakout to hit and get long off of strength when $1.98 is taken out with volume. Keep in mind that volume today is already well above the three-month average and the stock is trading very close to $1.98.

    To see more hot under-$10 stocks like Comverge (COMV), AVI BioPharma (AVII) and Siga Technologies (SIGA), check out the Stocks Under-$10 Setting Up To Trade Higher portfolio on Stockpickr.

    -- Written by Roberto Pedone in Winderemere, Fla.

     

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    Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.