Stock Quotes in this Article: AIQ, ANTH, ARWR, EDMC, RIMM

WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street when 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 Green Plains Renewable Energy (GPRE), which soared by 28%; Hansen Medical(HNSN), which ripped higher by 25.4%; Recon Technology (RCON), , which trended up by 23.5%; and Sanmina-SCI (SANM), which spiked higher by 16.8%. You don’t even have to catch the entire move in lower-priced stocks to make outsized returns when trading.

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One low-priced stock that recently ripped to the upside was Asia Entertainment & Resources (AERL), which I highlighted in Oct. 12's “5 Stocks Poised for Breakouts” at around $3.17 a share. I mentioned that AERL had rebounded off its previous low of $2.83 a share and it was starting to approach its 50-day moving average at $3.37 a share. That rebound was moving AERL within range of triggering a near-term breakout trade above some overhead resistance at $3.13 to $3.37 a share.

Guess what happened? In just a few weeks, shares of AERL started to trend above $3.13 and back above its 50-day at $3.37 a share. On Wednesday, this stock exploded higher with monster volume right near its 50-day, and it’s currently trading at around $4.29 a share. The recent strength in AERL has started to push the stock within range of triggering another major breakout trade above some overhead resistance levels at $3.80 to $4.66 a share. If those levels get taken out with volume, then AERL could be heading toward $5.50 to $6 a share in the near future.

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 love to trade stocks that are priced below $10. I 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.

Alliance HealthCare Services

 

One under-$10 stock in the healthcare facilities complex that’s trending very close to triggering a major breakout trade is Alliance HealthCare Services (AIQ). This company provides diagnostic imaging services and therapeutic services primarily to hospitals and other healthcare providers on a shared-service and full-time service basis. This stock has been on fire during the last three months, with shares up a whopping 60%.

If you look at the chart for Alliance HealthCare Services, you’ll notice that this stock has been coiling up and trading in a tight sideways trading pattern for the last two months, with shares moving between $1.20 on the downside and $1.50 on the upside. That tight trading pattern could be setting up AIQ for a powerful move higher if the stock can manage to break topside with volume soon.

Traders should now look for long-biased trades in AIQ once it manages to break out above some near-term overhead resistance levels at $1.46 to $1.50 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 96,479 shares. If that breakout triggers soon, then AIQ will set up to re-test or possibly take out its next major overhead resistance levels at $1.86 to $2.19 a share. Any high-volume move above $2.19 could even send AIQ to $3 or higher.

Traders can look to buy AIQ off weakness long as its trending above its 50-day at $1.37 a share, or above its 200-day at $1.24 a share with strong upside volume flows. Or you can buy off strength once it takes out $1.46 to $1.50 a share with volume, and then simply use a stop that sits right below its 50-day at $1.37 a share.

Arrowhead Research


Another under-$10 stock that’s setting up to trigger a major breakout trade is Arrowhead Research (ARWR). This is a development stage nanotechnology holding company that forms, acquires, and operates subsidiaries commercializing innovative nanotechnologies. The stock has been hit hard by the sellers so far in 2012, with shares down by over 50%.

If you take a look at the chart for Arrowhead Research, you’ll notice that just yesterday this stock exploded higher right off some previous support levels at $2.05 to $2.17 a share with monster upside volume. That move was driven by some positive drug data that showed a 99% target knockdown in monkeys without toxicity. That spike has now pushed ARWR within range of triggering a near-term breakout trade.

Market players should now look for long-biased trades in ARWR once it manages to trigger a breakout above some near-term overhead resistance levels at $2.74 to $2.80 a share, and then above $3 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 52,871 shares. If that breakout triggers soon, then ARWR has a chance for an explosive move higher back towards its next major overhead resistance levels at $3.50 to $4 a share, or possibly even $4.20 to $4.50 a share.

Traders can look to buy ARWR off any weakness as long as it’s trending above yesterday’s low of $2.32 a share with strong upside volume flows. You could also buy off strength once ARWR takes out $2.74 to $3 a share with heavy volume, and then simply use a stop that sits just below its 50-day at $2.53 a share.

Anthera Pharmaceuticals

One under-$10 name in the biotechnology and drugs complex that’s moving within range of triggering a near-term breakout trade is Anthera Pharmaceuticals (ANTH). This company is focusing on developing and commercializing products to treat serious diseases associated with inflammation, including cardiovascular and autoimmune diseases. This stock has been destroyed by the bears so far in 2012, with shares down by over 80%.

If you take a look at the chart for Anthera Pharmaceuticals, you’ll that this stock has been trending sideways for the last two months, with shares moving between 81 cents on the downside and $1.29 on the upside. Shares of ANTH have just today started to challenge its 50-day at 98 cents per share, and it’s quickly moving within range of triggering a major breakout trade above some near-term overhead resistance levels.

Traders should now look for long-biased trades in ANTH once it manages to break out above some near-term overhead resistance levels at $1.07 to $1.29 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 1,130,750 shares. If that breakout triggers soon, then ANTH will set up for a potentially explosive move higher back towards its next major overhead resistance level at $1.79 a share. Any high-volume move above $1.79 will give ANTH a chance to re-fill some of its previous gap down zone that started at around $2.80 a share.

Traders can look to buy ANTH as long as it’s trending above today’s low of 95 cents per share with strong upside volume flows. You can also buy off strength once ANTH takes out $1.07 to $1.29 a share with volume, and then simply use a stop that sits just below its 50-day at 98 cents per share.

Research In Motion

 

Another under-$10 name that’s trading very close to triggering a near-term breakout trade is Research In Motion(RIMM) (RIMM). This company designs, manufactures, and markets wireless solutions for the mobile communications market worldwide. It provides platforms and solutions for access to information, including email, voice, and instant messaging. This stock has been trending down so far in 2012, with shares off by around 40%.

If you look at the chart for Research In Motion, you’ll notice how this stock has found some buying interest during the last few weeks right above its 50-day moving average of $7.41 a share. Following that buying, shares of RIMM have started to trend higher and break out above some near-term overhead resistance at $8.08 a share, and above $8.45 to $8.49 a share. At last check, RIMM has hit an intraday high of $8.85 and volume is tracking in strong.

Market players should now look for long-biased trades in RIMM as long as it’s trending above $8.08 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 21,865,700 shares as bullish. If RIMM can maintain that trend, then this stock has a great chance to re-test or possibly take out its next major overhead resistance levels at $10.66 to $11.09 a share. Any high-volume move above $11.09 could put $12 to $13 a share into focus for RIMM.

Traders can look to buy RIMM off any weakness, and simply use a stop that sits just below its 50-day at $7.41 a share. Or you can buy off strength above $8.49 a share, and simply use a stop just below $8.08 a share.
 

Education Management

 

 

A final under-$10 name that’s trading within range of triggering a major breakout trade is Education Management (EDMC). This company is a provider of post-secondary education in North America. It offers academic programs to its students through campus-based and online instruction, or through a combination of both. This stock has been hit hard by the sellers so far in 2012, with shares down by a whopping 88%.

If you take a look at the chart for Education Management, you’ll see that this stock has been trending sideways for the past two months, with shares moving between $2.88 on the downside and $4.04 on the upside. Just today, shares of EDMC have started to flirt with its 50-day at $3.35 a share, and it’s quickly moving within range of triggering a major breakout trade. That breakout will hit once EDMC trends topside of its recent range with decent volume.

Traders should now look for long-biased trades in EDMC once it manages to break out above some near-term overhead resistance at $3.70 to $4.04 a share, and then once it takes out $4.28 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 185,692 shares. If that breakout triggers soon, then EDMC could easily hit $5 to $5.50 a share, or possibly even higher towards $6 a share.

One could look to buy EDMC off weakness to anticipate that breakout, and simply use a stop that sits just below some previous support levels at $3.02 to $2.95 a share. One could also buy off strength once EDMC clears $3.70 to $4.28 a share with high volume, and then simply use a stop just below $3.70 or right around its 50-day at $3.35 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.