Stock Quotes in this Article: BIOF, FTEK, NAK, SOL, GTAT

WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street when ceratin 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 in the under-$10 complex from Wednesday, including Cadiz (CDZI), which soared by 40%; Silicon Image (SIMG), which skyrocketed by 22.4%; MeetMe (MEET), which surged by 16.9%; and Merge Healthcare (MRGE), which finished up 11.1%. 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.

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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.

Fuel Tech

One under-$10 stock in the pollution and treatment controls complex that’s nearing a breakout trade is Fuel Tech (FTEK), an integrated company, which uses a range of advanced technologies to provide boiler optimization, improvement and air pollution reduction and control solutions to utility and industrial customers globally. This stock is off to a slow start in 2012, with shares down by around 19%.

If you take a look at the chart for Fuel Tech, you’ll notice that this stock bottomed in late May at around $3.47 a share, and then subsequently went on to start a strong uptrend towards its current price of $5.33 a share. During that uptrend, shares of Fuel Tech have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed the stock within range of triggering a major breakout trade.

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Traders should now look for long-biased trades in FTEK if it can manage to break out above some near-term overhead resistance levels at $5.38 to $5.57 a share, and then above some past resistance at $5.94 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 216,966 shares. Keep in mind that a move above $5.39 will also be bullish technical price action, since it will mean the FTEK has taken out its 200-day moving average. If we get that breakout soon, then FTEK could easily be on its way towards $7 to $8 a share.

If you’re in the bull camp on FTEK, then I would look to buy this stock off any weakness, and simply use a stop just below some major near-term support at $5 a share, or just below its 50-day moving average of $4.68 a share. One could also just get long off strength once FTEK clears those breakout levels with high volume, and then add to any long position once it takes out $5.94 with volume.

Northern Dynasty Minerals

An under-$10 stock in the gold and silver complex that looks poised to trend higher from here is Northern Dynasty Minerals (NAK), which is engaged in the exploration of mineral properties. Northern Dynasty Minerals holds 650 square miles of mineral claims in southwest Alaska. This stock is off to a bearish start in 2012, with shares down by over 58%.

If you take a look at the chart for Northern Dynasty Minerals, you’ll notice that this stock was slammed by the bears from March to late May, with shares plunging from over $7 to $2.25 a share. During that nasty move lower, shares of Northern Dynasty Minerals were consistently making lower highs and lower lows, which is bearish technical price action. That said, for the last two months this stock has started to mark a possible bottom, with shares trading between $2.20 and $2.94. This sideways price action is now setting up NAK to trigger a major breakout trade.

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Traders should now look for long-biased trades in NAK if this stock can manage to break out above its 50-day moving average at $2.50 a share, and then above some more overhead resistance levels at $2.72 to $2.94 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 291,714 shares. If we get that action soon, then NAK will have a great chance of hitting its next major overheard resistance levels at $3.75 to $4.31 a share.

If you’re bullish on NAK, then one could look to buy this stock off any weakness and simply use a stop just below $2.27 to $2.20 a share. One could also buy off strength and get long once NAK clears its 50-day with high volume, and then simply use a stop below $2.27 to $2.20 a share. Look to add to any long position once NAK takes out $2.72 to $2.94 a share with high volume.

BioFuel Energy

One under-$10 name in the chemical manufacturing complex that looks to trigger a major breakout trade is BioFuel Energy (BIOF), which produces and sells ethanol and its co-products (primarily distillers grain), through two ethanol production facilities located in Nebraska and Minnesota. This stock has been crushed by the sellers during 2012, with shares off by over 75%.

If you take a look at the chart for BioFuel Energy, you’ll notice that this stock has been destroyed by the sellers during the last six months, with shares dropping from over $18.40 to a recent low of $2.07 a share. During that monster move lower, shares of BioFuel Energy have been consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to reverse that downtrend during the last few weeks, and some large upside volume spikes are hitting the chart.

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Traders should now look for long-biased trades in BIOF if it can manage to trigger a breakout trade above some near-term overhead resistance at $3.39 to $3.75 a share with high volume. Look for volume on that breakout that hits near or above its three-month average action of 45,033 shares. If we get that move, then BIOF will have a great chance of taking out its 50-day moving average of $4.24 a share, which would be more bullish technical action. If that 50-day gets taken out with volume, then look for BIOF to make a run at $5 to $6 a share.

If you’re bullish on BIOF, then one could look to buy this stock off any weakness, and simply use a stop just below some near-term support at $3 to $2.80 a share. One could also just buy off strength once BIOF clears $3.39 to $3.50 a share with high volume. Traders can then look to add to any long positions once BIOF takes out $3.75 to $4.24 with high volume.

GT Advanced Technologies

An under-$10 name in the semiconductor complex that looks ready to trigger a sharp move higher is GT Advanced Technologies (GTAT), a global provider of polysilicon production technology and multicrystalline ingot growth systems and related photovoltaic manufacturing services for the solar industry, and sapphire growth systems and material for the light emitting diode and other specialty markets. This stock has been pressured by the bears so far in 2012, with shares down by 33%.

If you take a look at the chart for GT Advanced Technologies, you’ll notice that the sellers hammered this stock from its March high of $8.61 to its 52-week low of $3.92 a share hit in early June. During that nasty slide lower, shares of GT Advanced Technologies were consistently making lower highs and lower lows, which is bearish technical price action. That said, since tagging that low, shares of GTAT have started to reverse its downtrend and trade higher. That move has now pushed the stock within range of triggering a near-term breakout trade.

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Traders should now look for long-biased trades in GTAT if it can manage to trigger a break out above some near-term overhead resistance at $5.21 to $5.57 a share with high volume. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 2,633,410 shares. If that breakout hits soon, then look for GTAT to make a monster run towards its 200-day moving average of $7.01 a share.

If you like the setup here for GTAT, then look to buy this stock off weakness and simply use a stop just below some major near-term support at $4.62 to $4.54 a share. Those support levels have held up for the last month and change. One could also buy off strength once GTAT takes out $5.21 to $5.57 a share, and then simply use a stop just below its 50-day moving average of $4.76 a share.

Keep in mind that the short-sellers are very involved in GTAT, since its current short interest as a percentage of the float is 24.8%. If that breakout triggers soon, then we could easily see a massive short-squeeze develop that sends this stock into the stratosphere.

ReneSola

One more under-$10 name in the semiconductor complex that looks ready to rip significantly higher is ReneSola (SOL), a global manufacturer of solar wafers and producer of solar power products based in the People's Republic of China. This stock is off to a slow start in 2012, with shares down by around 11%.

If you take a look at the chart for ReneSola, you’ll see that the bears have been in full control of this stock for the past six months, with shares falling from a high of $3.38 to a recent low of $1.16 a share. During that monster move lower, shares of ReneSola have been consistently making lower highs and lower lows, which is bearish technical price action. That said, during the last two months, shares of SOL have started to stabilize and possibly make a bottom at around $1.17 to $1.16 a share. Now shares of SOL are quickly moving within range of triggering a major breakout trade.

Traders should now look for long-biased trades in SOL if this stock can manage to trigger a breakout trade above some near-term overhead resistance at $1.40 a share with high volume. Look for a sustained move or close above $1.40 a share with volume that clocks in near or above its three-month average action of 565,362 shares. If we get that action soon, then SOL could easily re-test or possibly take out its next major overhead resistance levels at $1.69 to $1.73 a share, or even its 200-day moving average of $1.91 a share. If SOL were to clear its 200-day with volume, this stock could even head towards $2.40 to $2.80 a share.

One could look to buy SOL off any weakness and simply anticipate that breakout, and then simply use a stop right below some near-term support at $1.26 a share. One could also buy off strength once SOL clears $1.40 with high volume, and then simply use a stop right below today’s low of $1.30 or even around that $1.26 support level.

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 Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

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.