Stock Quotes in this Article: AEN, ALIM, CDTI, HWAY, OCLR, PSUN

WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street when certain 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 arena, including Affymax (AFFY), exploding up over 40%; Ever-Glory International (EVK), ripping over 33%; Central European Distribution (CEDC), ripping higher by 25%; and Pacific Sunwear (PSUN), up 15%. You don’t even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

 

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    Pacific Sunwear is a name I just featured on Wednesday in "5 Earnings Stocks to Squeeze the Bears." At one point today, PSUN was up as high as $1.93 a share.

    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.

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

     

    Healthways


    One under-$10 stock that’s close to triggering a bullish technical trade is Healthways (HWAY), which provides solutions to help people improve physical, emotional and social well-being. This stock has been hit hard by the sellers this year, with shares off over 35%.

    This stock is ripping higher today by over 7% after Stifel Nicolaus upgraded the stock to buy from hold.

    If you take a look at the chart for Healthways, you’ll notice that this stock gapped down huge back in October from $11.20 to a low of $6.22 a share. The stock then went on to print an even lower low at $5.59 towards the end of November. Since hitting $5.59, the stock has started to uptrend and make mostly higher lows and higher highs. This could indicate that the trend is starting to change and HWAY is setting up for much higher prices.

     

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    Traders should now watch HWAY for a breakout trade if this stock can manage to sustain a high-volume move and close above $7.30 and then $7.91 (its 50-day moving average). A high-volume move above those levels should trigger a much larger move higher that will bring that big gap down into play. Look for volume that’s tracking in close to or above its three-month average action of 352,432 shares. At last check, volume is already well above that level, which is bullish.

    You could be a buyer of this stock once we get above $7.30 with volume, and then add above the 200-day once that’s taken out with volume. Simply use a mental stop that’s a few percentage points below $7.30 in case it’s not ready to break out just yet. Target a run back toward $10 to $11 if we get that action in the coming days or weeks.

    Clean Diesel Technologies

    Another under-$10 stock that’s very close to triggering a big breakout trade is Clean Diesel Technologies (CDTI), a vertically integrated global manufacturer and distributor of emissions control systems and products, focused in the heavy duty diesel and light duty vehicle markets. This stock is down huge in 2011, with shares off by over 65%.

    If you take a look at the chart for Clean Diesel Technologies, you’ll notice that this stock dropped big from its July high of $8 to a recent low of $1.50 a share. Since printing that low, the stock has now moved into sideways pattern between $2.58 and 3.22 a share. A move outside of that shorter-term sideways pattern will likely set this stock up for its next big trend.

    Trades should now watch CDTI for a near-term breakout above $3.22 on heavy volume. Look for volume that’s tracking in close to or above its three-month average action of 268,131 shares.

    >>7 Stocks Rising on Huge Volume

    At last check, volume has already hit over 350,000 shares, which is well above the average levels. Traders should now wait and see if the stock can close above $3.22. A close above that level should set this stock up to re-test its 200-day moving average of $4.58, or possibly trend much higher.

    You could now be a buyer of this stock above $3.22 if we get that strong close today. I would simply use a mental stop that’s a few percentage points below $3.22, or that’s just below the 50-day at $3.11 a share. I would then add to any long positions once CDTI takes out $3.60 and then $4.20 on high-volume.

    Adeona Pharmaceuticals

    One name under-$10 name in the biotechnology and drugs complex that’s worth putting on your trading radar is Adeona Pharmaceuticals (AEN), which develops medicines for the treatment of serious central nervous system diseases. This stock is down modestly by 7.2% so far in 2011.

    If you take a look at the chart for Adeona Pharmaceuticals, you’ll notice that this stock has been uptrending strong for the last month after it broke out above 69 cents a share on heavy volume. That breakout came after the stock gapped up back above its 50-day moving average.

    During this monster uptrend, the stock has been consistently making higher lows and higher highs, which is bullish price action. Volume has also been expanding large on the up days for AEN during the past couple of weeks, which is also bullish technical behavior.

    >>13 Biotech Stocks Bought and Sold by Hedge Funds

    Market players should now watch to see if AEN can trigger a big breakout trade on a sustained high-volume move and close above some near-term overhead resistance at $1.24 a share. At last check, the stock has already started to flirt with $1.24 today, and volume is registering well above its three-month average action of 194,273 shares, at over 750,000 shares traded so far.

    You could be a buyer of AEN on any move or close over $1.24 on high volume. I would simply use a mental stop that’s a few percentage points below that $1.24 level. If we do see that breakout soon, then this stock could easily have a date with its next significant overhead resistance level at $2.25 a share. That’s some big upside from current levels, so be ready to play this off any high-volume move over $1.24.

    Alimera Sciences

    Another under-$10 stock that’s very close to triggering a major breakout trade is Alimera Sciences (ALIM), a biopharmaceutical company that specializes in the research, development and commercialization of prescription ophthalmic pharmaceuticals. The bears can certainly declare victory on this stock so far this year since shares are down by a whopping 87%.

    If you take a look at the chart for Alimera Sciences, you’ll notice that this stock plunged huge off its November high of $8.77 to its recent low of $1.09 a share. The reason for that huge drop was due to the fact that Food and Drug Administration refused to approve Iluvien, a time-released injection that is intended to treat diabetic macular edema, which can cause blurred vision and blindness.

    >>4 Beaten-Down Stocks Poised for Rebounds

    Following that plunge, the stock has now started to trade range-bound between $1.09 and $1.44 a share. A move outside of that range should set this stock up for its next big trend.

    Traders should watch ALIM now for a breakout trade if the stock can manage to trade above some near-term overhead resistance levels at $1.32 to $1.44 a share on high volume. Look for volume that’s tracking in close to or above its three-month average action of 273,964 shares. At last check, the volume today is over 500,000 shares with the stock trading up 3% to $1.30.

    One could be a buyer of ALIM off any weakness and simply anticipate the breakout trade. I would use a mental stop just below $1.20 to $1.15 a share. You could also buy off strength and get long over $1.31 and then $1.44 a share. I would add aggressively to any long position above $1.70 since that will clear most of the near-term overhead resistance until we cross $2 a share. If you buy off strength use a mental stop a few percentage points below $1.31.

    Oclaro

    One more under-$10 stock that’s starting to look interesting from the long side is Qclaro (OCLR), a provider of core optical network components, modules and subsystems to global telecommunications equipment manufacturers. This is another stock that the bears have crushed in 2011, with shares off by over 75%.

    If you take a look at the chart for Oclaro, you’ll see that this stock dropped sharply from its November high of $4.46 to its recent low of $2.68 a share. After hitting that low, the stock has started to trend back up, and it’s beginning to make higher lows. Market players should now watch for a sustained high-volume move and close above some overhead resistance levels to trigger a breakout trade.

    Traders should watch OCLR for a high-volume move and close above some near-term overhead resistance at $3.07 and then $3.48 (its 50-day) a share. Look for volume on a move above those levels to hit near or above its three-month average action of 1,208,230 shares. If we get that action, then this stock has a great chance to trade back towards its next significant overhead resistance level at $4.50 a share.

    If you’re bullish on OCLR, buy this name off any weakness and simply use a mental stop right below $2.68 a share. You could also buy off strength and get long on a move over $3.07 a share. Use a mental stop just a few percentage points below $3.07 if you buy off strength. I would then add aggressively to any long positions once the stock takes out its 50-day with volume.

    To see more hot under-$10 stocks, 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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    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.