- 5 Rocket Stocks for Gluttonous Turkey Day Gains
- Time to Sell These 5 'Toxic' Stocks
- 5 Earnings Short-Squeeze Plays
- 5 Must-See Charts
- 5 Stocks With Big Insider Buying
5 Stocks Under $10 Setting Up to Trade Higher - views
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 today in the under-$10 complex, including TOP Ships (TOPS), exploding higher by over 40%; The Hackett Group (HCKT), soaring over 20%; KongZhong (KONG), ripping over 19%; and FuelCell Energy (FCEL), surging over 17%. You don’t even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
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.
Zion Oil & Gas
One under-$10 stock that’s nearing a breakout trade is Zion Oil & Gas (ZN), an initial stage oil and gas exploration company with oil and gas exploration in Israel. This stock is off to a hot start in 2012, with shares up over 45%.
If you take a look at the chart for Zion Oil & Gas, you’ll notice that this stock just bounced right around its 50-day moving average of $2.43 on monster volume. Volume yesterday was 425,000 shares, and today it’s already registered over 524,000 shares, which is well above its three-month average action 101.279 shares. This huge volume spike now puts shares of Zion Oil & Gas within range of triggering a major breakout soon.
Traders should now watch ZN for a breakout trade if this stock can take out its 200-day moving average of $3.32 and then some past overhead resistance at $3.48 with volume. A sustained high-volume move and close over those levels should set this stock up to re-test some past resistance levels at $3.84 to $4.50, or potentially much higher.
If we get that action soon, I would play this breakout from the long side and simply use a stop right under the 200-day.
Another under-$10 stock that’s creeping towards a big breakout is metal mining player Denison Mines (DNN), which is engaged in uranium exploration, development, mining and milling with uranium mining projects in both the U.S. and Canada and development projects in Canada, the U.S., Zambia and Mongolia. This stock is blazing a path to glory so far in 2012, with shares up over 55%.
If you take a look at the chart for Denison Mines, you’ll notice that this stock recently bounced right around its 200-day moving average of $1.63 a share on heavy volume. That bounce has taken the stock towards its current price of $1.97 in just a few trading sessions. That move has come with big volume, since yesterday’s volume was 1.52 million shares, and today’s volume is already over 1.93 million shares. Both days easily surpassed its three-month average action of 1,045,970 shares. Now Denison Mines is within range of triggering a big breakout.
Traders should look for long-biased trades in DNN if this stock can manage to break out above some near-term overhead resistance at $1.95 to $2.04 on high volume. Look for volume on the move that’s near or well above its three-month average action of 1,045,970 shares.
If we get that action soon, then look for a run back towards $2.30 to $2.43 a share or possibly much higher near $3 a share in the near future. I would simply use a mental stop right below $1.95 if you get long off strength and play this breakout.
An under-$10 name in the gold and silver complex that looks poised for big upside from here is Almaden Minerals (AAU), which is engaged in the business of the acquisition, exploration and when warranted, development of mineral properties. 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 Almaden Minerals, you’ll see that this stock had been trading within a sideways trading pattern for the last few weeks, between $2.36 on the downside and $2.69 on the upside. Shares of Almaden just broke out above that $2.69 level on decent volume. Now the stock is quickly approaching another major breakout if it can manage to take out some near-term overhead resistance levels.
Market players should look for long biased trades in AAU if this stock can manage to break out above some overhead resistance levels at $2.90 to $3.17 a share with high-volume. Look for volume on that move that’s near or well above its three-month average action of 155,766 shares. If that breakout triggers soon, then look for AAU to trade back towards its next significant overhead resistance levels at $3.67 to $4.27 a share in the near future.
If you buy AAU off of strength on a move over $2.90, then I would simply use a stop that’s a few percentage points below that $2.90 breakout level, and maybe even down towards the last breakout level at $2.69 a share.
another under-$10 stock that has big upside potential is Bacterin International (BONE), which develops, manufactures and markets biologics products to domestic and international markets through Bacterin's biologics division. This stock is off to a slow start in 2012, with shares up around 7%.
Northland Securities started coverage on Bacterin International today with an outperform rating and a $4.80 price target. Noble Financial also started coverage on the stock today with a buy rating and a $6.50 price target.
If you take a look at the chart for Bacterin International, you’ll notice that this stock has been uptrending strong since buyers stepped in last December at around $1.96 a share. During that uptrend, the stock has been making mostly higher lows and higher highs, which is bullish price action. Now shares of Bacterin International are trading within range of triggering a big breakout. Volume today is also off the charts, since at last check over 1.12 million shares have traded versus its three-month average action of 164,636 shares.
Traders should now look for long-biased trades in BONE if this stock can manage to take out some near-term overhead resistance at $3.03 a share with heavy volume. Look for volume on that move that registers near or well above its three-month average volume of 164,636 shares.
If we get that action today or soon, then look for a big spike in BONE back towards its next significant overhead resistance levels at $3.40 to $3.93 a share, or possibly much higher. At last check, BONE has hit a daily high of $3.01 and the volume is huge, so that breakout could trigger today. Keep in mind that a close over $3.03 would be even more bullish than just an intraday move.
If you get long BONE off a sustained high-volume move and close over $3.03 a share, then I would look to use a stop that’s a few percentage points below $3 a share, in case this breakout fails to hold and send the stock off to the races.
An under-$10 name in the auto and truck space that’s quickly approaching a major breakout trade is Kandi Technologies (KNDI), which is engaged in the design, development, manufacturing, and commercializing of electrical vehicle, all-terrain vehicles, go-karts, and specialized automobile related products for the People’s Republic of China and global export markets. This stock hasn’t done much in 2012, with shares off by around 3.7%.
If you take a look at the chart for Kandi Technologies, you’ll see that this stock has been in a strong uptrend for the past few months, with shares consistently making higher lows and higher highs. That uptrend has taken the stock from its October low of $1.88 towards its current price of just over $3.50 a share. Now shares of Kandi Technologies are within range of a triggering a breakout trade.
Market players should look for long biased trades in KNDI if the stock can manage to take out some near-term overhead resistance at $3.85 to $4.19 with volume. Watch for volume on that move that’s near or above its three-month average action of 119,328 shares.
If we get that action soon, then look for KNDI to make a run at its next significant overhead resistance levels near $4.48 to $5.50 a share. I would get long off a strong volume move over $3.85 and simply use a stop a few percentage points below that level.
To see more hot under-$10 stocks, check out the Stocks Under-$10 Setting Up To Trade Higher portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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.