Stock Quotes in this Article: ARIA, MRGE, NOR, TWGP, WEN

DELAFIELD, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when 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.

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Just take a look at some of the hot movers in the under-$10 complex from Wednesday, including Jakks Pacific (JAKK), which soared higher by 25%; Career Education (CECO), which jumped higher by 15%; Vicor (VICR), which ripped higher by 13.8%; and Immunomedics (IMMU), which spiked higher by 12.2%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

One low-priced stock that recently soared higher was biopharmaceutical player Pain Therapeutics (PTIE), which I highlighted in Oct. 11's "5 Stocks Ready to Break Out" at $2.80 per share. I mentioned in that piece that shares of Pain Therapeutics had formed a major bottoming pattern, since the stock was finding buying interest each time it pulled back to around $2.50 a share. Shares of PTIE were then starting to spike higher and challenge both its 50-day and 200-day moving averages. That move was quickly pushing shares of PTIE within range of triggering a major breakout trade above some near-term overhead resistance at $3.05 a share.

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Guess what happened? Shares of Pain Therapeutics didn't wait long to trigger that breakout, since the stock explode to the upside on October 17 with heavy upside volume. Then on October 22, shares of PTIE exploded again with monster upside volume, and the stock hit an intraday high of $4.24 a share. That represents a monster gain of over 50% in just two weeks for anyone who bought this stock and played the technical breakout.

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.

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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.

Ariad Pharmaceuticals

One under-$10 biopharmaceutical player that's just starting to enter breakout territory is Ariad Pharmaceuticals (ARIA), which is engaged in the discovery and development of breakthrough medicines to treat cancers by regulating cell signaling with small molecules. This stock has been crushed by the sellers so far in 2013, with shares down huge by 82%.

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If you take a look at the chart for Ariad Pharmaceuticals, you'll notice that this stock has gapped down big over the last month, with the first gap sending the stock from around $19 to $4 a share with massive downside volume. The second gap sent ARIA from $4.50 to its recent low of $2.62 a share with big downside volume. Since hitting that $2.62 low, shares of ARIA have now started to rebound off oversold territory, since its current relative strength index reading is 17.92. That move is starting to push shares of ARIA into breakout territory, since the stock is flirting with some near-term overhead resistance at $3.27 today.

Traders should now look for long-biased trades in ARIA if it manages to take out some near-term overhead resistance at $3.27 and once it clears Thursday's intraday high of $3.38 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 8.03 million shares. If we get that move soon, then ARIA will set up to re-fill some of that second gap down zone that started at $4.53 a share. Shares of ARIA could easily tag its next major overhead resistance level at $5.98 a share if that gap gets filled with strong upside volume flows.

Traders can look to buy ARIA off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.01 a share. One can also buy ARIA off strength once it clears those resistance levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Merge Healthcare

Another stock that's starting to move within range of triggering a breakout trade is Merge Healthcare (MRGE), which develops software solutions that facilitate the sharing of images to create a more effective and efficient electronic health care experience for patients and physicians. This stock hasn't done much in 2013, with shares up just over 8% so far.

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If you take a look at the chart for Merge Healthcare, you'll notice that this stock has been trending sideways since it gapped down in August, with shares moving between $2.35 on the downside and $2.98 on the upside. Shares of MRGE are now starting to trend back above its 50-day moving average of $2.65 a share. That move is quickly pushing the stock within range of triggering a big breakout trade above the upper end of its sideways trading chart pattern.

Market players should now look for long-biased trades in MRGE if it manages to break out above some near-term overhead resistance levels at $2.82 to $2.98 a share, and then once it takes out its 200-day moving average at $3.08 and its gap down day high of $3.20 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 o 793,997 shares. If we get that move soon, then MRGE will set up to re-fill some of its previous gap down zone from August that started at $4.60 a share.

Traders can look to buy MRGE off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2.55 to $2.54 a share, or below that recent low of $2.35 a share. One can also buy MRGE off strength once it clears those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Tower Group International

One under-$10 financial player that's starting to trend within range of triggering a near-term breakout trade is Tower Group International (TWGP), which underwrites insurance and reinsurance products in Bermuda, the U.S., and London markets. This stock has been destroyed by the bears so far in 2013, with shares off huge by 77%.

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If you take a look at the chart for Tower Group International, you'll notice that this stock has been downtrending badly over the last three months, with shares plunging lower from its high of $22.04 to its recent low of $3.71 a share. During that downtrend, shares of TWGP have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of TWGP have recently formed a double bottom chart pattern at $3.71 to $3.75 a share, and it's starting to move within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in TWGP if it manages to break out above some near-term overhead resistance at $4.05 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 2.51 million shares. If that breakout triggers soon, then TWGP will set up to re-test or possibly take out its next major overhead resistance levels at $4.53 to $4.54 a share. Any high-volume move above those levels will then give TWGP a chance to trend well north of $5 a share.

Traders can look to buy TWGP off any weakness to anticipate that breakout and simply use a stop that sits right below those double bottom support areas at $3.75 to $3.71 a share. One can also buy TWGP off strength once it clears resistance at $4.05 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Wendy's

Another under-$10 stock that's starting to move within range of triggering a major breakout trade is Wendy's (WEN), which operates quick-service restaurants specializing in hamburger sandwiches throughout the U.S. This stock has been on fire so far in 2013, with shares up sharply by 57%.

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If you take a look at the chart for Wendy's, you'll notice that this stock has been trending sideways and consolidating for the last two months, with shares moving between $8.11 on the downside and $8.88 on the upside. This consolidation has been occurring just above WEN's 50-day moving average of $8.23 a share. Shares of WEN are now starting to spike higher and move within range of triggering a major breakout trade above the upper-end of its recent range.

Market players should now look for long-biased trades in WEN if it manages to break out above its 52-week high at $8.88 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 6.61 million shares. If that breakout hits soon, then WEN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets of that breakout are $12 to $15 a share.

Traders can look to buy WEN off weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average at $8.23 a share, or below more support at $8.11 a share. One can also buy WEN off strength once it clears its 52-week high at $8.88 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Noranda Aluminum

One final under-$10 stock that looks poised for higher prices is Noranda Aluminum (NOR), a North American integrated producer of value-added primary aluminum products and high-quality rolled aluminum coils. This stock has been hammered by the sellers, since shares of are off sharply by 54% so far in 2013.

If you take a look at the chart for Noranda Aluminum, you'll notice that this stock has been downtrending badly for the last five months, with shares plunging lower from its high of $4.23 to its recent low of $2.21 a share. During that downtrend, shares of NOR have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of NOR have recently started to rebound off that $2.21 low, and the stock has pushed back above its 50-day moving average of $2.66 a share. That move is quickly pushing the stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in NOR if it manages to break out above some near-term overhead resistance at $2.82 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 442,823 shares. If that breakout triggers soon, then NOR will set up to re-test or possibly take out its next major overhead resistance levels at $3.20 to $3.48 a share. Any high-volume move above those levels will then give NOR a chance to tag its 200-day moving average at $3.80 a share.

Traders can look to buy NOR off weakness to anticipate that breakout and simply use a stop that sits right below some near-term support levels at $2.55 to $2.40 a share. One can also buy NOR off strength once it clears $2.82 a share with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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 Delafield, Wis.

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

Roberto Pedone, based out of Delafield, Wis., 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.