Stock Quotes in this Article: AT, CBMX, SGMO, ZN, TROV

WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street that certain stocks trading for $10 a share or less 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 Comstock (CHCI), which skyrocketed higher by 59.8%; Revolution Lighting Technologies (RVLT), which soared by 26.9%; Net 1 UEPS Technologies (UEPS), which surged by 26.8%; and LiveDeal (LIVE), which exploded higher by 26%. 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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One low-priced stock that recently exploded to the upside was biotechnology and drugs player Anacor Pharmaceuticals (ANAC), which I highlighted in March 13's “5 Stocks Poised for Breakouts” at around $3.80 a share. I mentioned in that piece that shares of ANAC were uptrending strong in early March from $3 to $4.02 a share, which was bullish technical price action. That move was quickly pushing shares of ANAC within range of triggering a near-term breakout trade above its 50-day moving average of $4.10 a share and then above its gap down day high from January at $4.39 a share.

Guess what happened? Shares of ANAC triggered that breakout trade on March 21 with above-average volume, and the stock closed at $4.96 a share. That close put the stock above both of those key breakout levels I had highlighted a week earlier. Shares of ANAC then gapped up huge the following trading session with massive upside volume. This stock tagged $7 a share on Mar. 22, which represents a gigantic return for anyone who played that breakout. This stock is the essence of why breakout trading is so powerful, because you can see that it only took two trading sessions to rack up massive gains.

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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 produce monster moves higher in very short time frames.

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.

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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CombiMatrix

One under-$10 stock that’s trending very close to trigger a major breakout trade is CombiMatrix (CBMX), a molecular diagnostics company that operates mainly in the field of genetic analysis and molecular diagnostics. This stock has been blasted by the sellers so far in 2013, with shares off by 38%.

If you take a look at the chart for CombiMatrix, you’ll notice that this stock has recently put in a triple-bottom chart pattern at $2.80 to $2.97 a share, after the stock crashed lower from $7.64 a share. If shares of CBMX can hold this triple bottom support area, then the stock could be setting up to trigger a major breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in CBMX if it manages to break out above some near-term overhead resistance levels at $3.73 to $3.78 a share and then once it takes out more resistance at $4.40 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 657,703 shares. If that breakout triggers soon, then CBMX will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $5.56 to $6 a share. Any high-volume move above $6 will then put $7 to $7.64 into range for shares of CBMX.

Traders can look to buy CBMX off any weakness to anticipate that breakout and simply use a stop that sits just below $3 to $2.80 a share. One can also buy CBMX off strength once it takes out those breakout levels with volume and then simply use a stop that at around $3.20 to $3 a share.

One of the reasons that CBMX has explosive upside potential is because the stock is so heavily shorted. The current short interest as a percentage of the float for CMBX is extremely high at 17.3%. We could easily get a monster short squeeze if CMBX takes out those resistance levels, so make sure to put this name on your breakout trading radar.

TrovaGene

Another under-$10 stock that’s trending within range of triggering a near-term breakout trade is TrovaGene (TROV), a development stage molecular diagnostic company that focuses on the development and marketing of urine-based nucleic acid tests for patient and disease screening and monitoring. This stock has been trending slightly off so far in 2013, with shares down by 9.6%.

If you take a look at the chart for TrovaGene, you’ll notice that this stock has just started to break out above a key downtrend line with strong upside volume. Prior to TROV flirting with taking out its downtrend line, the stock was downtrending badly from $8.96 to its recent low of $5.09 a share. That downtrend has started to reverse, with shares of TROV entering an uptrend over the last month, with shares moving higher from $5.09 to its recent high of $6.69 a share. That move is quickly pushing TROV within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in TROV if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $6.63 a share and then above more resistance at $6.69 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 58,705 shares. If that breakout hits soon, then TROV will set up to re-test or possibly take out its next major overhead resistance levels at $7.38 to $7.40 a share. Any high-volume move above those levels will then put $8.54 to $8.96 into range for shares of TROV.

Traders can look to buy TROV off any weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support levels at $5.73 to $5.50 a share. One could also buy TROV off strength once it clears those breakout levels with volume and then simply use a stop right below $6 a share. I would add to either position once TROV takes out $7.38 to $7.40 a share with volume.

Atlantic Power

Another under-$10 name that’s trending within range of triggering a near-term breakout trade is Atlantic Power (AT), a power generation and infrastructure company in the U.S. and Canada. This stock is has been hammered by the sellers so far in 2013, with shares off by 55%.

If you take a look at the chart for Atlantic Power, you’ll notice that this stock recently gapped down big from over $10 to $6 a share on massive downside volume. Following that move, shares of AT continued to trend lower and the stock printed a new 52-week low of $4.56 a share. That move has pushed shares of AT into extremely oversold territory, since the stock has a relative strength index reading of 21.77. Shares of AT have started to bounce off that $4.56 low, and it’s now quickly approaching a near-term breakout trade.

Traders should now look for long-biased trades in AT if it manages to break out above some near-term overhead resistance at $5.15 a share with high volume. Look for a sustained move or close above $5.15 a share with volume on that move that hits near or above its three-month average action of 1.54 million shares. If AT triggers that breakout soon, then this stock will set up to re-test or possibly take out its next major overhead resistance level at $5.76 to its gap down day high of $7.32 a share. Any high-volume move above $7.32 will then give AT a chance to re-fill some of its gap down zone that started near $10 a share.

Traders can look to buy AT off any weakness to anticipate that breakout and simply use a stop that sits right below $4.56 a share. One can also buy AT off strength once it takes out $5.15 with volume and then simply use a stop that’s a few percentage points blow your entry point.

Sangamo BioSciences

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Another under-$10 name that’s already starting to trigger a breakout trade is Sangamo BioSciences (SGMO), which is engaged in the research, development and commercialization of engineered DNA-binding proteins for the development of novel therapeutic strategies for unmet medical needs. This stock has been on fire in 2013, with shares up a whopping 64%.

If you take a look at the chart for Sangamo BioSciences, you’ll notice that this stock has started to trend back above its 50-day moving average of $9.34 a share with decent upside volume flows. Shares of SGMO have also started to break out above some near-term overhead resistance at $9.48 a share.

Market players should now look for long-biased trades in SGMO as long as it’s trending above its 50-day at $9.34 a share and then once it sustains a move or close above $9.48 a share with high volume. Look for a sustained move or close above $9.48 a share with volume that hits near or above its three-month average action of 743,270 shares. If SGMO can maintain that trend, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $10.50 to $11.24 a share. Any high-volume move above $11.24 would then push shares of SGMO into new 52-week-high territory, which is bullish technical price action.

Traders can look to buy SGMO off any weakness and simply use a stop that sits right below its 50-day at $9.34 a share. One could also buy SGMO off strength as long as its trending above $9.48 a share and then simply use a stop right below its 50-day at $9.34 a share.

Zion Oil & Gas

One more under-$10 stock that’s trending very close to triggering a near-term breakout trade is Zion Oil & Gas (ZN), which is engaged in oil and gas exploration in Israel. This stock has been hit hard by the sellers so far in 2013, with shares off by 29%.

If you take a look at the chart for Zion Oil & Gas, you’ll see that this stock has been uptrending strong for the last month, with shares moving higher from its low of $1.14 to its recent high of $1.33 a share. During that move, shares of ZN have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ZN within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in ZN if it manages to break out above its 50-day moving average of $1.26 a share and then once it clears more overhead resistance at $1.27 to $133 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 185,082 shares. If that breakout triggers soon, then ZN will set up to re-test or possibly take out its next major overhead resistance levels at $1.50 to $1.79 a share Any high-volume move above $1.79 to $1.83 will then put $1.92 to $2.10 into range for shares of ZN.

Traders can look to buy ZN off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.20 to $1.14 a share. One could also buy ZN off strength once it clears those breakout levels with volume and then simply use the same stop at around $1.20 to $1.17 a share.

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 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.