Stock Quotes in this Article: CPRX, INO, SVU, GURE, LPR

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 in the under-$10 complex from Wednesday, including Internet Gold Golden Lines (IGLD), which soared by 22.9%; Sify Technology (SIFY), which spiked to the upside by 18.3%; InterMune (ITMN), which trended up by 16.3%; and Rediff.com (REDF), which jumped by 15.3%. 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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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 times produce stocks that make monster moves higher in very short timeframes.

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.

 

Supervalu

One under-$10 stock in the grocery store complex that’s trading very close to triggering a near-term breakout trade is Supervalu (SVU), which, together with its subsidiaries, operates retail and wholesale food stores in the U.S. This stock has been crushed by the sellers so far in 2012, with shares down by a whopping 70%.

Shares of SVU are spiking notably higher today by 7% to $2.20 after the company said its review of strategic alternatives is proceeding and that it is in talks with several parties.

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If you take a look at the chart for Supervalu, you’ll notice that this stock recently failed at its 50-day moving average and then went on to print a new low of $1.80 a share. Following that low, shares of SVU have started to rebound with heavier volume as it now approaches its 50-day again at $2.28 a share. That bounce is quickly pushing SVU within range of triggering a near-term breakout trade that could push the stock back into a previous gap down zone.

Traders should now look for long-biased trades in SVU once it manages to break out above some near-term overhead resistance at $2.28 to $2.62 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 5.1 million shares. If that breakout triggers soon, then SVU will have a great chance of re-testing or possibly taking out its gap down day high from July near $3.50 a share. Any high-volume move above $3.50 will then give SVU a chance to fill some of its gap that started at around $5.30 a share.

Traders can look to buy SVU off weakness long as its trending within range of its 50-day at $2.28 a share with strong upside volume flows. I would add to any long positions once SVU clears $2.58 to $2.62 a share with volume, and then add again above $3.50 a share. I would use a stop that sits just below today’s low of $2.09 a share.

Lone Pine Resources

An under-$10 stock in the oil and gas complex that’s setting up to trigger a near-term breakout trade is Lone Pine Resources (LPR), an independent oil and gas exploration, development, and production company with operations in Canada within the provinces of Alberta, British Columbia, Quebec and the Northwest Territories. This is another stock that’s been hammered by the sellers so far in 2012, with shares off by 75%.

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If you take a look at the chart for Lone Pine Resources, you’ll see that this stock bottomed at a low of $1.09 a share in August after falling from over $5 a share from the previous months. Following that low, shares of LPR have started to rebound strong to a recent high of $1.86 a share. During that rebound, shares of LPR have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed LPR within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in LPR once it manages to trigger a break out above some near-term overhead resistance levels at $1.68 to $1.86 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 802,580 shares. If that breakout triggers soon, then LPR will have an excellent chance of re-testing or possibly taking out its next major overhead resistance levels at $2.43 to $2.80 a share. Any high-volume move above $2.80 will put $3.50 to $3.80 into range for LPR.

Traders can look to buy LPR off any weakness as long as it’s trending above its 50-day at $1.48 a share with strong upside volume flows. You could also buy off strength once LPR takes out those breakout levels with volume, and simply use a stop just below its 50-day at $1.48 a share.

Inovio Pharmaceuticals

An under-$10 stock in the biotechnology and drugs complex that looks ready to trigger a breakout trade is Inovio Pharmaceuticals (INO), which is engaged in the development of a new generation of vaccines, called synthetic vaccines, focused on cancers and infectious diseases. This stock is off to a strong start in 2012, with shares up sharply by 48%.

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If you take a look at the chart for Inovio Pharmaceuticals, you’ll notice that this stock has been uptrending very strong for the past six months, with shares soaring from 38 cents to a recent high of 76 cents per share. During that uptrend, shares of INO have been mostly making higher lows and higher highs, which is bullish technical price action. That trend has now pushed shares of INO within range of triggering a major breakout trade.

Traders should now look for long-biased trades in INO once it manages to break out above some near-term overhead resistance at 76 cents per share with high volume. Look for a sustained move or close above 76 cents with volume that hits near or above its three-month average volume of 553,362 shares. If that breakout triggers soon, then INO will setup to re-test or possibly take out its next major overhead resistance levels at 89 to 96 cents per share, and possibly even $1.20 to $1.30 a share or higher.

Traders can look to buy INO as long as it’s trending above its 50-day moving average of 60 cents per share with strong upside volume flows. I would add to any long positions once INO manages to take out 76 cents per share with heavy volume, and then add again above 89 to 96 cents per share.

Gulf Resources

Another under-$10 name that’s trading very close to triggering a major breakout trade is Gulf Resources (GURE), which is engaged in manufacturing and trading of bromine and crude salt, and manufacturing and selling of chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, wastewater processing, papermaking chemical agents and inorganic chemicals. This stock has been trending lower so far in 2012, with shares down by around 27%.

If you take a look at the chart for Gulf Resources, you’ll see that this stock has been trending sideways for the last three months, with shares moving between $1.02 on the downside and $1.33 on the upside. In just the last two trading sessions, GURE has started to see monster upside volume flows as the stock has now started to move within range of triggering a major breakout trade above the highs of its recent range.

Market players should now look for long-biased trades in GURE if it can manage to trigger a break out above some near-term overhead resistance levels at $1.33 to $1.48 a share with high volume. Look for a sustained move or close above those levels with volume that hits close to or above its three-month average action of 82,095 shares. If that breakout triggers soon, then GURE will setup to re-test or possibly take out its next major overhead resistance levels at $1.73 to $1.78 a share. Any high-volume move above those levels will put $2.20 to $2.30 into focus for GURE.

Traders can look to get long GURE off any weakness, and simply use a stop that sits right around its 50-day moving average of $1.14 a share. One could also buy GURE off strength once it takes out $1.24 to $1.33 with volume, and then add again once it clears $1.48 with volume.

Catalyst Pharmaceutical Partners

One more under-$10 stock that’s trading within range of triggering a near-term breakout trade is Catalyst Pharmaceutical Partners (CPRX), which is focused on the development and commercialization of prescription drugs targeting addiction diseases and disorders of the central nervous system with a focus on the treatment of addiction and epilepsy. This stock has been on fire so far in 2012, with shares up sharply by 33%.

If you take a look at the chart for Catalyst Pharmaceutical Partners, you’ll notice that this stock recently pulled back sharply off its high of $2.27 to a low of $1.40 a share. That pullback included a gap down in price and few daily spikes below its 50-day moving average. Following that low, share of CPRX have started to rebound and uptrend a bit, with shares making lower highs and setting up for higher highs. That move is quickly pushing CPRX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in CPRX once it manages to break out above some near-term overhead resistance at $1.78 a share with high volume. Look for a sustained move or close above $1.78 a share with volume that hits near or above its three-month average action of 1.3 million shares. If that breakout triggers soon, then CPRX will setup to re-test or possibly take out its next major overhead resistance levels at $2.04 to $2.27 a share. Any high-volume move above $2.27 will put $2.60 to $3 into focus for CPRX.

One could look to buy CPRX off weakness to anticipate that breakout, and simply use a stop that sits right around some key near-term support at $1.54 a share. One could also buy off strength once CPRX clears $1.78 with high volume, and then simply use a stop right below its 50-day at $1.59 a share. I would add to either position once CPRX takes out $2.04 to $2.27 with strong upside volume.

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.