Stock Quotes in this Article: ACAD, CERE, MITL, PATH, ZGNX

WINDERMERE, Fla. (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 Wednesday, including Progenics Pharmaceuticals (PGNX), which skyrocketed by 21%; Canadian Solar (CSIQ), which soared by 11.7%; Partner Communications (PTNR), which trended higher by 11.3%; and JA Solar (JASO), which surged by 9.3%. 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 ripped to the upside was DragonWave (DRWI), which I highlighted in Dec. 13's “5 Under-$10 Stocks Showing Profit Potential” at around $2.33 a share. I mentioned in that piece that DRWI had been uptrending for the last month, with the stock making mostly higher lows and higher highs, which is bullish technical price action. That bullish price action was quickly pushing DRWI within range of triggering a big breakout trade. That trade was set to hit once DRWI cleared some near-term overhead resistance levels at $2.50 to $2.52 a share and then once it took out more overhead resistance at $2.72 to $2.91 a share.

Guess what happened? Shares of DRWI went on to trigger that breakout just three trading sessions later with monster upside volume. The stock has continued to soar and shares of DRWI have hit a recent high of $3.28 a share. That's a big move in just a few weeks for anyone who took that trade. Shares of DRWI could still be poised for more upside if the stock can continue to trend above its 200-day at $2.88 a share and then once it breaks out again over its recent high of $3.28 a share with volume.

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.

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.

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With that in mind, here's a look at several under-$10 stocks that look poised to potentially trade higher from current levels.

Acadia Pharmaceuticals

One under-$10 stock that's trending very close to triggering a near-term breakout trade is Acadia Pharmaceuticals (ACAD), which is focused on the development and commercialization of small molecule drugs for the treatment of central nervous system disorders. This stock has been on fire during the last three months, with shares soaring over 70%.

If you take a look at the chart for Acadia Pharmaceuticals, you'll see that this stock gapped up sharply back in December from just under $2.50 a share to a high of $6.53 a share with monster upside volume. Following that move, shares of ACAD have sold off to its recent low of $4.17 a share. The stock has now started to trend sideways with shares moving between $4.62 on the downside and $5.18 on the upside. A high-volume move above the upper-end of that recent range will trigger a breakout for shares of ACAD.

Traders should now look for long-biased trades in ACAD if it manages to break out above some near-term overhead resistance levels at $5.00 to $5.18 a share and then once it clears more resistance at $5.50 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 3,339,370 shares. If that breakout hits soon, then ACAD will set up to re-test or possibly take out its recent high of $6.53 a share.

Traders can look to buy ACAD off weakness as long as it's trending above some near-term support levels at $4.62 a share or even $4.17 a share. I would use a stop that sits just below those levels. You can also buy off strength once ACAD takes out those breakout levels with volume and then simply use a stop that sits near $4.62 a share.

Mitel Networks

Another under-$10 stock that's quickly moving within range of triggering a near-term breakout trade is Mitel Networks (MITL), which is a provider of integrated communications solutions focused on the small-to-medium sized enterprise market. This stock has been trending higher during the last three months, with shares up just over 20%.

If you take a look at the chart for Mitel Networks, you'll notice that this stock recently bounced strongly right off its 50-day moving average of $2.81 a share. That bounce is quickly pushing shares of MITL within range of triggering a near-term breakout trade and within range of taking out its 200-day moving average of $3.55 a share.

Market players should now look for long-biased trades in MITL once it breaks out above some near-term overhead resistance at its 200-day of $3.55 and then above some more overhead resistance at $3.61 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 38,423 shares.

Traders can look to buy MITL off any weakness as long as it's trending above some near-term support levels at $3 to $2.81 a share. I would simply use a stop that sits right below $3 or $2.81 if you buy off weakness. One can also buy off strength if MITL clears those breakout levels with volume and then simply use a stop that sits right around $3.20 a share.

NuPathe

One under-$10 name that's trending very close to triggering a major breakout trade is NuPathe (PATH), which is a biopharmaceutical company focused on the development and commercialization of branded therapeutics for diseases of the central nervous system, including neurological and psychiatric disorders. This stock has been blazing a trail to the upside so far in 2012, with shares up 89%.

This company has a major catalyst on the horizon, since they'll hear from the FDA on Jan.17, 2013 for the possible approval of their drug Zelrix, which is designed to treat migraines.

If you take a look at the chart for NuPathe, you'll notice that this stock has been uptrending very strong for the past month and change, with shares soaring from a low of $2.47 to its recent high of $3.60 a share. During that uptrend, shares of PATH have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PATH within range of triggering a major breakout trade.

Traders should now look for long-biased trades in PATH if it manages to break out above some near-term overhead resistance levels at $3.60 to $3.85 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 243,547 shares. If that breakout hits soon, then PATH will set up to re-fill some of its previous gap down zone from September that started at around $4.40 a share. Some possible upside targets off that breakout are $4.59 to its 2012 high of $5.10 a share. Any high-volume move above $5.10 a share could then push PATH towards $6 to $7 a share.
Traders can look to buy PATH off any weakness and simply use a stop that sits just below its 50-day moving average of $3.22 a share. One could also buy PATH off strength once it takes out those breakout levels with high volume and then simply use a stop that sits just below its 200-day at $3.51 a share.

Ceres

Another under-$10 name that's trading very close to triggering a near-term breakout trade is Ceres (CERE), which is an agricultural biotechnology company selling seeds to produce renewable biomass feedstocks that can enable the large-scale replacement of petroleum and other fossil fuels. This stock has been hammered by the bears so far in 2012, with shares off by 72%.

If you take a look at the chart for Ceres, you'll see that this stock has been trending sideways for the past month and change, with shares moving between $3.43 on the downside and $4.27 on the upside. This sideways action is coming after shares of CERE plunged from $9.50 a share to $3.43 a share, during the months of July to late November. Traders should now look for a high-volume move above the upper-end of its recent range to trigger a near-term breakout trade.

Market players should now look for long-biased trades in CERE if it manages to take out some near-term overhead resistance levels at $4.19 to $4.50 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 48,945 shares. If that breakout hits soon, then CERE will set up to re-test or possibly take out its next significant overhead resistance levels at $5.50 to $5.62 a share. Any high-volume move above those levels will then put $6.16 to $7 a share into focus for shares of CERE.

Traders can look to buy CERE off any weakness and then simply use a stop that sits right around some key near-term support at $3.73 to $3.61 a share. One could also buy CERE off strength once it takes out those breakout levels with volume and then simply use a stop that sits right around $3.73 a share.

Zogenix

One final under-$10 name that's trending very close to triggering a major breakout trade is Zogenix (ZGNX), which is a pharmaceutical company, engaged in the commercializing and developing products for the treatment of central nervous system disorders and pain. This stock has been hit hard by the sellers so far in 2012, with shares off by 36%.

If you take a look at the chart for Zogenix, you'll notice that this stock recently gapped down big from $2.36 a share to its recent low of $1.11 a share with heavy downside volume. Following that move, shares of ZGNX have started to rebound sharply and trend higher towards its current price of $1.43 a share. That move is quickly pushing ZGNX within range of triggering a major breakout trade. That trade will hit once ZGNX manages to take out its gap down day high of $1.44 a share with high volume.

Traders should now look for long-biased trades in ZGNX if it manages to break out above its gap down day high of $1.44 a share with high volume. Look for a sustained move or close above $1.44 a share with volume that hits near or above its three-month average action of 1,386,640 shares. If that breakout hits soon, then ZGNX will set up to re-fill some of its previous gap down zone that started at $2.36 a share. Some possible upside targets off that breakout are its 200-day at $2.21 or its 50-day at $2.34 a share.

Traders can look to buy ZGNX off any weakness and simply use a stop that sits right below some near-term support levels at $1.30 to $1.20 a share. One could also buy ZGNX off strength once it clears $1.44 a share with volume and then simply use a stop that sits right around $1.30 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.

Roberto Pedone, based out of Windermere, Fla., 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.