Stock Quotes in this Article: ISR, LXRX, PIP, ECYT, GALE

WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street that 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 Ocean Power Technologies (OPTT), which skyrocketed by 70%; Complete Genomics (GNOM), which ripped to the upside by 42%; Amyris (AMRS), which traded up 18%; and SkyWest (SKYW), which closed up 14%. 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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I highlighted Ocean Power Technologies in "7 Stocks Under $10 With Relative Strength" for its bullish price action when it was trading at just $2.20 a share. I also recently flagged SkyWest in another 5 stocks under $10 set to soar article, well before it made that monster move higher on Wednesday.

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.

IsoRay

One under-$10 stock that’s trading within range of triggering a major breakout trade is IsoRay (ISR), which develops, manufactures and sells isotope-based medical products and devices for the treatment of cancer and other malignant diseases. This stock has been blazing a trail to the upside so far in 2012, with shares up over 80%.

If you take a look at the chart for IsoRay, you’ll see that this stock has been uptrending very strong since mid-April, with shares skyrocketing from 38 cents to a recent high of $1.60 a share. During that uptrend, shares of IsoRay were making higher lows and higher highs, which is bullish technical price action. After hitting that high at $1.60, the stock pulled back to 84 cents and has now resumed its uptrend again with shares trading at around $1.25 a share. Shares of IsoRay are now moving within range of triggering a major near-term breakout trade.

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Market players should now look for long-biased trades in ISR if it can manage to trigger a breakout trade above some near-term overhead resistance at $1.26 to $1.41 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 498,384 shares. If we get that action soon, then ISR has a great chance of re-testing and taking out its next significant overhead resistance level at $1.60 to $1.89 a share. It’s very possible that this stock is setting up for a major move above $2 a share if that breakout triggers soon.

If you like the setup here for ISR, then I would look to buy this stock off any weakness and simply use a stop right below its 50-day moving average of 91 cents per share. I would add to any long positions once ISR takes out $1.26 and then $1.41 with high-volume. Also look to add above $1.60 to $1.83 if the stock makes that monster move soon.

Galena Biopharma

An under-$10 stock in the biotechnology and drugs complex that looks ready to trigger a near-term breakout trade is Galena Biopharma (GALE), which is focused on discovering, developing and commercializing therapies addressing unmet medical needs using targeted biotherapeutics. This stock is off to a monster so far in 2012, with shares up over 240%.

If you take a look at the chart for Galena Biopharma, you’ll see that this stock has been trading range bound for the last three months, between $1.04 on the downside and $1.92 on the upside. This stock recently has started to move back above its 50-day moving average of $1.41 a share, and it’s been finding support near $1.50 a share. Traders should now keep an eye on GALE for a potential major breakout trade if this stock can take out the upper-end of its recent range with volume.

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Market players should consider long-biased trades in GALE if it can manage to trigger a break out above some near-term overhead resistance at $1.80 to $1.92 a share with high volume. Look for volume on a sustained move or close above those levels that register near or above its three-month average action of 2.1 million shares. If we get that action soon, then GALE could potentially make a massive move back towards its March resistance levels at $2.45 to $3.54 a share.

If you’re in the bull camp on GALE, then one could look to buy this stock off any weakness and simply use a stop right below its 50-day moving average of $1.41 a share. If you get long off weakness, then look to add to that position once GALE blasts through $1.80 to $1.92 a share with heavy volume. You could also just buy off strength once it takes out those levels with volume, and simply use a stop a few percentage points below $1.80 a share.

Make note that the current short interest as a percentage of the float for GALE is pretty high at 7.5%. This stock is an excellent candidate for a short-squeeze play if it triggers that breakout soon.

PharmAthene

Another under-$10 name in the biotechnology and drugs complex that’s trading within range of a near-term breakout trade is PharmAthene (PIP), a biodefense company engaged in the development and commercialization of medical countermeasures against biological and chemical weapons. This stock is off to a decent start in 2012, with shares up over 15% so far.

If you take a look at the chart for PharmAthene, you’ll notice that this stock gapped up and spiked huge in early June from around $1.21 a share to a high of $1.84 a share. Following that sharp move higher, shares of PharmAthene then went on to pullback hard and hit a near-term low of $1.31 a share. Now the stock has started to gain some buying momentum again with PIP moving back above its 50-day moving average of $1.43 a share. This stock is also starting to flirt with taking out its 200-day moving average of $1.47 a share.

>>22 Biopharma Stocks With Breakout Potential in 2012
Traders should now look for long-biased trades in PIP if it can manage to trigger a break out above some near-term overhead resistance at $1.53 to $1.57 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 423,573 shares. If we get that action soon, then PIP will have a great chance of re-testing and possibly taking out its next major overhead resistance levels at $1.68 to $1.70, and at $1.84 to $1.89 a share. If all those levels get taken out with volume, then PIP will be free to clear $2.10 a share, and after $2.10 there’s very little overhead resistance until $2.40 to $3.35 a share.

If you’re bullish on PIP, then one could buy off weakness and simply use a stop right below its 50-day moving average of $1.43 a share. There’s some pretty solid near-term support at $1.40 and at $1.31 a share as well that traders can key off of. One could also just buy off strength once $1.53 to $1.57 are taken out with volume, then add above $1.89 to $2.10 a share if the upside volume continues to track in strong. Use a stop just below the 200-day at $1.47 a share if you get long off strength.

This stock is pretty popular among short-sellers. The current short interest as a percentage of the float for PIP is rather high at 13.4%. This makes PIP a great short-squeeze candidate if it can manage to enter breakout territory soon.

Endocyte

Another under-$10 name in the biotechnology and drugs complex that looks ready to trigger a major breakout trade is Endocyte (ECYT), which is engaged in developing therapies for the treatment of cancer and inflammatory diseases. This stock is off to a red-hot start in 2012, with shares up over 110%.

If you take a look at the chart for Endocyte, you’ll notice that this stock has been uptrending very strong since mid-May, with shares soaring from around $6.07 a share to a recent high of $8.55 a share. During that solid uptrend, shares of Endocyte have been making mostly higher lows and higher highs, which is bullish technical price action. Over the last few weeks, shares of Endocyte have been moving sideways between $7.75 a share and $8.55 a share. That sideways action is now setting up ECYT for a near-term breakout trade if the stock can manage to clear the upper-end of its recent range.

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Market players should now look for long-biased trades in ECYT if it can manage to trigger a break out above some near-term overhead resistance at $8.55 to $8.57 a share with high-volume. Look for volume off a sustained move or close above those levels that hits near or above its three-month average action of 819,995 shares. If we get that move soon, then this stock could explode to the upside and trend back towards its next major overhead resistance levels at $11.11 to $11.63 a share, or possibly even $12.65 to $13.50 a share.

If you like the setup here for ECYT, then one could buy this stock off any weakness and simply use a stop just below $7.86 to $7.75 a share, or even right below its 50-day moving average of $7.18 a share. If you get long off weakness, then I would add aggressively once $8.55 to $8.57 is taken out with volume. You could also just buy off strength once $8.55 to $8.57 are cleared with volume, and simply use a stop a few percentage points below that level ,or just below $7.86 a share.

The short-sellers are circling around this stock, since the current short interest as a percentage of the float for ECYT is very high at 13.4%. The bears have also been increasing their bets from the last reporting period by 25.9%, or by about 657,000 shares. The bears will not be happy to see ECYT trigger that breakout soon, so look for them to cover and push it sharply higher if it triggers soon.

Lexicon Pharmaceuticals

One more under-$10 name that looks ready to trigger a big-time breakout trade is Lexicon Pharmaceuticals (LXRX). This is a biopharmaceutical company focused on the discovery and development of breakthrough treatments for human disease. This stock is off to a monster start in 2012, with shares up over 110%.

If you take a look at the chart for Lexicon Pharmaceuticals, you’ll see that this stock has been uptrending extremely strong since it broke out in June above some past overhead resistance at $2.01 a share. Since triggering that breakout, shares of Lexicon Pharmaceuticals have skyrocketed to a recent high of $2.90 a share. During that uptrend, shares of LXRX have been making higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in LXRX if it can manage to trigger a near-term breakout trade above some overhead resistance levels at $2.78 to $2.90 with high volume. Look for a sustained move or close above those levels with volume that’s near or above its three-month average action of 1,093,060 shares. If we get that action soon, then LXRX could explode north of $3 a share and possibly tag $4 a share rather rapidly.

One could be a buyer of LXRX off weakness to anticipate that breakout, and simply use a stop just below some near-term support at $2.54 to $2.30 a share. If you buy off weakness, then I would add to the position once $2.78 to $2.90 is taken out with volume. You could just also buy off strength and get long once this breaks out over $2.78 to $2.90 a share, and simply use a stop at around $2.54 or a big higher.

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.