Stock Quotes in this Article: CPE, LXRX, NIHD, XGTI, VMEM

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 Thursday, including Infinera (INFN), which is skyrocketing higher by 25%; Geron (GERN), which is soaring higher by 19%; Netlist (NLST), which is ripping higher by 14%; and You On Demand (YOD), which is spiking sharply higher by 12%. 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 spiked sharply higher after I featured it was apparel player Mecox Lane (MCOX), which I highlighted in Jan. 24's "5 Stocks Poised for Breakouts" at around $4.10 per share. I mentioned in that piece that shares of Mecox Lane had been trending sideways and consolidating for the last four months, with shares moving between $3.10 on the downside and $4.85 on the upside. This stock was just starting to trend back above both its 50-day and 200-day moving averages and it was moving within range of triggering a big breakout trade above some key overhead resistance levels at $4.57 to $4.85 a share.

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Guess what happened? Shares of Mecox Lane started to flirt with those breakout levels over the last couple of trading sessions with strong upside volume flows. This stock took those levels out with authority this morning after the stock tagged an intraday high of $5.32 a share with strong upside volume. That represents a big gain of 30% from the time of the original article. think this stock still has big upside ahead of it if MCOX can manage to take out Thursday's high of $5.32 a share with strong volume soon.

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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.

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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.

Violin Memory


One under-$10 storage devices player that's starting to trend within range of triggering a big breakout trade is Violin Memory (VMEM), which develops and supplies memory-based storage systems to bring storage performance in line with high-speed applications, servers and networks in the Americas, Europe and the Asia Pacific. This stock has been destroyed by the bears over the last three months, with shares off by a whopping 46%.

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If you take a look at the chart for Violin Memory, you'll notice that this stock gapped down sharply back in November of last year from $6.21 to $2.99 with monster downside volume. Following that gap, shares of VMEM went on to make a new low at $2.50 a share. Shares of VMEM have now started to rebound off that $2.50 low and more recently its $3.20 low. That spike off $3.20 is now quickly pushing shares of VEME within range of triggering a big breakout trade above a key downtrend line.

Traders should now look for long-biased trades in VMEM if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $3.75 to some more near-term overhead resistance levels at $3.97 to $4.17 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 volume of 1 million shares. If that breakout triggers soon, then VMEM will set up to re-test or possibly take out its next major overhead resistance level at $4.37 a share. Any high-volume move above $4.37 will then give VMEM a chance to re-fill some of its previous gap-down-day zone that started at $6.21 a share.

Traders can look to buy VMEM off any weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $3.20 a share. One can also buy VMEM off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

NII Holdings


Another under-$10 telecommunications services player that's starting to move within range of triggering a big breakout trade is HII Holdings (NIHD), which provides wireless communication services under the Nextel brand name to businesses and individuals in Mexico, Brazil, Argentina, Peru, and Chile. This stock has been hammered by the sellers over the last six months, with shares down big by 59%.

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If you take a look at the chart for NII Holdings, you'll notice that this stock has been uptrending over the last month and change, with shares moving higher from its low of $1.90 to its recent high of $3.39 a share. During that uptrend, shares of NIHD have been making mostly higher lows and higher highs, which is bullish technical price action. This uptrend is coming after shares of NIHD collapsed badly from September of 2012 at $7.50 to its recent low of $1.90 a share. The recent uptrend for NIHD has now pushed the stock within range of triggering a big breakout trade.

Market players should now look for long-biased trades in NIHD if it manages to break out above some near-term overhead resistance levels at $3 to $3.39 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 6.86 million shares. If that breakout hits soon, then NIHD will set up to re-test or possibly take out its next major overhead resistance levels $3.79 to $4.50 a share. Any high-volume move above those levels will then give NIHD a chance to tag $5.15 to its 200-day moving average of $5.54 a share.

Traders can look to buy NIHD off any weakness to anticipate that breakout and simply use a stop that sits right below its 50-day moving average of $2.52 a share. One can also buy NIHD off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

XG Technology


One under-$10 wireless communications player that's starting to trend within range of triggering a major breakout trade is XG Technology (XGTI), which develops communications technologies for wireless networks. This stock has slammed hard by the sellers over the last six months, with shares off by a whopping 62%.

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If you take a look at the chart for XG Technology, you'll notice that this stock has just started to spike sharply higher right off its 50-day moving average of $1.66 a share. This spike is coming after shares of XGTI recently pulled back off its high of $2.20 a share. Shares of XGTI are now starting to trend within range of triggering a major breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in XGTI if it manages to break out above some near-term overhead resistance levels at $2.03 to $2.20 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 volume of 211,781 shares. If that breakout triggers soon, then XGTI will set up to re-test or possibly take out its next major overhead resistance levels at $2.74 to $2.93 a share. Any high-volume move above those levels will then give XGTI a chance to tag $3.50 a share.

Traders can look to buy XGTI off weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average at $1.66 a share. One can also buy XGTI off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Callon Petroleum


Another under-$10 energy player that's quickly trending within range of triggering a near-term breakout trade is Callon Petroleum (CPE), which engages in the acquisition, exploration, development and production of crude oil and natural gas properties. This stock has been on fire over the last six months, with shares up huge by 70%.

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If you take a look at the chart for Callon Petroleum, you'll notice that this stock has been uptrending over the last month and change, with shares moving higher from its low of $5.70 to its intraday high of $7.01 a share. During that uptrend, shares of CPE have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CPE within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in CPE if it manages to break out above some near-term overhead resistance levels $6.99 to $7.05 a share and then once it takes out more key resistance levels at $7.28 to its 52-week high at $7.60 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 422,727 shares. If that breakout hits soon, then CPE will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $9 to $10 a share.

Traders can look to buy CPE off weakness to anticipate that breakout and simply use a stop that sits just below its 50-day moving average of $6.43 a share or below more key support at $6 a share. One can also buy CPE off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

Lexicon Pharmaceuticals


One final under-$10 biopharmaceutical player that looks poised for higher prices from current levels is Lexicon Pharmaceuticals (LXRX), which focuses on the discovery and development of treatments for human disease. This stock has been hit pretty hard by the sellers over the last three months, with shares off by 21%.

If you take a look at the chart for Lexicon Pharmaceuticals, you'll notice that this stock been trending sideways and consolidating over the last month and change, with shares moving between $1.70 on the downside and $2.06 on the upside. Shares of LXRX are just starting to spike higher off that big near-term support level at $1.70 a share. That spike is starting to push shares of LXRX within range of triggering a big breakout trade.

Traders should now look for long-biased trades in LXRX if it manages to break out above its 50-day moving average of $1.96 a share and then once it takes out some more near-term overhead resistance levels at $2.01 to $2.06 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 1.16 million shares. If that breakout hits soon, then LXRX will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $2.25 a share to $2.45 to $2.60 a share.

Traders can look to buy LXRX off weakness to anticipate that breakout and simply use a stop that sits right below that key near-term support at $1.70 a share. One can also buy LXRX off strength once it starts to take out those breakout levels 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.