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5 Under-$10 Stocks With Big Upside Potential - 25808 views
WINDERMERE, Fla. (Stockpickr) -- There isn’t a day that goes by on Wall Street where some 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 category, including Park Bancorp (PFED), advancing by over 51%; Uranium Resources (URRE), adding over 27%; China Metro-Rural (CNR), ripping over 23%; and Orsus Xelent Technologies (ORS), tacking on close to 25%. 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’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.
Here ‘s a look at a number of under-$10 stocks that look poised to trade higher from current levels.
OCZ Technology Group
One under-$10 stock that’s setting up to break out is OCZ Technology (OCZ), a provider of high performance solid state drives and memory modules for computing devices and systems. This stock, which I also featured earlier this month in "5 Stocks Set to Soar off Bullish Earnings," has been trending strong in 2011, with shares up over 20%.
If you take a look at the chart for OCZ Technology Group, you’ll see that this stock plunged huge from its July high of $10.94 a share to a recent low of $4.14 a share hit in early October. Since printing that low, the stock has started to rebound sharply and is now trading over $5.50 a share. Shares of OCZ have also started to make lower highs in October, which is bullish and shows that traders are paying up to for this stock.
Market players should now watch this stock very closely for a strong volume move above some big overhead resistance at around $6 a share. A strong volume move above that level will then set this stock up to re-test its 200-day moving average of $7.32 a share. Volume today is tracking in extremely strong, and the stock is soaring more than 11%. At last check, volume has registered 2.8 million shares, which is well above its three-month average volume of 1.5 million shares.
One could be a buyer of this stock off any weakness and simply use a mental stop at near the 50-day moving average of $5.40 a share. If we don’t get much weakness, then I would look to get long once this stock busts above $6 a share on strong volume. Look for volume that’s tracking in close to or above the 1.5 million shares. I would then add aggressively to any long position once this stock takes out its 200-day moving average of $7.32 with strong volume. A high-volume move above those levels should set this stock up for a huge move higher.
This stock has an enormous short interest, with 36.3% of the tradable float currently sold short by the bears. If we see that breakout trigger in the coming days or weeks, then look for a giant short squeeze to take hold as long as the volume is there.
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Another under-$10 name you should put on your trading radar is 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. The bears have decimated this stock in 2011, with shares off by over 60%.
If you take a look at the chart for Denison Mines, you’ll notice that this stock formed a perfect double-top chart pattern in early August at around $2.20 a share. Since that double top, the stock has plunged all the way down to a recent low of 81 cents a share. The stock has now rebounded sharply off that low to its current price of around $1.24 a share.
Market players should now watch for a breakout trade if this stock can manage to trade and close above $1.26 a share and above its 50-day moving average of $1.36 a share on big volume. A sustained high-volume move above those overhead resistance levels should set this stock up for a big run back towards $1.70 a share or possibly even higher. Volume today is tracking in decent with over 1.355 million shares traded at last check, which is very close to its three-month average volume of 1.47 million shares.
One could be a buyer of this stock off any noticeable weakness and simply use a mental stop just below $1.20 a share. I would start to add long aggressively once this stock takes out the 50-day moving average of $1.36 with strong volume. If we get that trigger, then I see DNN making a large rip higher, so put this name on your trading radar.
One name that’s just started to trade over $10 a share and looks poised for higher prices is Commercial Metals (CMC), which recycles, manufactures, fabricates and distributes steel and metal products and related materials and services through a network of locations throughout the U.S. and internationally. This stock has been an underperformer this year, with shares down by over 30%.
On Wednesday, corporate raider-turned-activist-investor Carl Ichan nominated three directors to the board of Commercial Metals. Icahn current controls over 10% of the company’s shares.
If you take a look at the chart for Commercial Metals, you’ll notice that this stock was whacked lower by the bears from its July high of $14.88 to a recent low of $8.55 a share. Since hitting that low, the stock has rebounded to its current price of just over $10.50 a share. This stock has also just started to move back above its 50-day moving average of $10.69 a share on solid volume.
Traders should know keep an eye on this stock for a breakout trade if it can manage to move above some past overhead resistance levels at $11.13 to $11.32 a share and then $12 a share on strong volume. A strong-volume move above those levels should set this stock up to make a monster run back towards $14 a share or possibly even higher. Make not that this stock has also been making higher lows, which is a bullish technical sign. If that trend continues, this stock sets up nicely of we can see that breakout trigger in the coming days or weeks.
One could be a buyer of this stock on any weakness and anticipate the breakout, or just wait for the stock to clear $11.13 with volume. I would use a tight mental stop just below the 50-day moving average of $10.69 if you buy of weakness. I would add aggressively to any long position once the stock takes out $12 a share with volume.
Commercial Metals, with a current yield of 4.3%, is one of the highest-yielding metals and mining stocks.
If you’re looking for an under-$10 name in the trucking complex, then take a look at Swift Transportation (SWFT). This company is a transportation services company and a truckload carrier in North America. This stock has been trending lower in 2011, with shares off by around 30% so far this year.
This stock is rising by around 6% today after the company reported better-than-expected third-quarter earnings driven by improving volumes and pricing.
If you take a look at the chart for Swift Transportation, you’ll notice that this stock was hammered by the bears from its July high of $14.36 to a recent a 52-week low of $5.39 a share. Since hitting that low in early October, the stock has spiked big and now trades at just over $8.46 a share. Traders should now watch for this stock to trigger a big breakout if it can manage to trade above $8.84 to $9.40 a share with solid volume.
Volume today is tracking in very strong with over 4.7 million shares traded, which is well above its three-month average volume of 2.3 million shares. A high-volume move above $8.84 to $9.40 should set this stock up to make a run at its 200-day moving average of $12.10 or possibly even higher.
One could be a buyer of this stock on any notable weakness and anticipate the breakout, or you could just wait for the breakout and then get long off strength. If you buy off weakness, I would use a mental stop at around the 50-day moving average of $7.76 a share. If you get long off strength, buy a high-volume move over $8.84 and then add aggressively over $9.40 a share. Use a mental stop for that trade that’s a few percentage points below $8.84.
This stock has a notable short interest since around 8% of the tradable float is sold short by the bears. The bears have also been increasing their bets from the last reporting period by 20.7%, or by about 1.1 million shares. Look for a tradable short-squeeze in SWFT once it clears $9.40 with volume.
As of the most recently reported period, Swift was one of the holdings of Daniel Loeb's Third Point.
One more under-$10 stock that’s setting up to trend higher is Neoprobe (NEOP), a biomedical company that develops and commercializes oncology products. This stock has been struggling so far this year, with shares off by around 18%.
This company announced on Wednesday night that its New Drug Application for Lymphoseek has been accepted for review by the U.S. Food and Drug Administration. Lymphoseek is a new lymph-node mapping agent used to determine the spread of cancer. This news has spiked that stock over 6% today at last check on heavy volume.
If you take a look at the chart for Neoprobe, you’ll notice that this stock is quickly approaching a big breakout if it can manage to trade above a key descending trend line that started back in June at around $3.90 a share. Look for this stock to trigger that conformation by trading above $3.25 a share with strong volume. Volume so far today is tracking in very strong with over 1.1 million shares traded, which is well above its three-month average volume of 777,000 shares.
If we do see a breakout above that key descending trend line, then this stock is likely to re-test its 200-day moving average of $3.48 a share. Once we get above that area with volume, then I like this stocks chances to make a monster move back towards $5.50 a share or possibly even higher.
One could be a buyer of this stock on any weakness and anticipate the breakout, or simply wait for the breakout and buy off strength. I would simply use a mental stop just below some major support at $2.75 a share if you buy off weakness. If you enter off of strength, I would get long on the break above $3.25 or above $3.50 with a mental stop a few percentage points below either entry point.
This is another heavily shorted stock with around 13% of the tradable float currently sold short by the bears. If you see some of those overhead resistance levels I mentioned start to get taken out to the upside, then look for a big short squeeze to kick off for NEOP.
To see more hot under-$10 stocks, including Ur-Energy (URG), Adventrx Pharmaceuticals (ANX) and Harvard Bioscience (HBIO), 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.