Stock Quotes in this Article: GDP, MDR, NEON, TTS, QRHC

DELAFIELD, Wis. (Stockpickr) -- There isn't a day that goes by on Wall Street when certain stocks trading for 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.

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Just take a look at some of the big movers in the under-$10 complex from Tuesday, including TigerLogic (TIGR), which is exploding higher by 30%%; Blonder Tongue Labs (BDR), which is ripping higher 30%; Amarin (AMRN), which is soaring higher by 22%; and Atlanticus (ATLC), which is jumping higher by 19%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.

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.

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.

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Quest Resource

 

One under-$10 environmental services player that's starting to move within range of triggering a big breakout trade is Quest Resource (QRHC), which provides management programs to reuse, recycle, and dispose various waste streams and recyclables in the U.S. This stock has been destroyed by the bears over the last three months, with shares down sharply by 62%.

If you take a glance at the chart for Quest Resource, you'll notice that this stock has been carving out a major bottoming chart pattern over the last month and change, with shares finding buying interest each time it has pulled back to around $1.40 to just under $1.40 a share. Shares of QRHC are now starting to bounce modestly higher off those support levels and it's quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in QRHC if it manages to break out above some key near-term overhead resistance levels at $1.59 to $1.61 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 of 160,431 shares. If that breakout triggers soon, then QRHC will set up to re-test or possibly take out its next major overhead resistance levels at $1.73 to $1.85 a share, or its gap-down-day high from September at $2 a share. Any high-volume move above $2 will then give QRHC a chance to re-fill some of its previous gap-down-day zone from September that started at $4 a share.

Traders can look to buy QRHC off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $1.43 to $1.41 a share or near its 52-week low of $1.33 a share. One can also buy QRHC off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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McDermott International

 

Another under-$10 basic materials player that's starting to trend within range of triggering a near-term breakout trade is McDermott International (MDR), which operates as an engineering, procurement, construction, and installation company worldwide. This stock has been hammered lower by the bears in 2014, with shares down sharply by 53%.

If you take a look at the chart for McDermott International, you'll see that this stock recently formed a double bottom chart pattern at $3.60 to $3.66 a share. Following that bottom, shares of MDR have now started to trend higher off those support levels and it's quickly moving within range of triggering a near-term breakout trade above some key overhead resistance levels.

Market players should now look for long-biased trades in MDR if it manages to break out above some key near-term overhead resistance levels at $4.39 to $4.41 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 6.63 million shares. If that breakout hits soon, then MDR will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $4.93 to $5.50 a share.

Traders can look to buy MDR off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $4 a share or near those double bottom support levels. One can also buy MDR off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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Goodrich Petroleum

 

One under-$10 independent oil and gas player that's starting to trend within range of triggering a big breakout trade is Goodrich Petroleum (GDP) which is engaged in the exploration, development, and production of oil and natural gas. This stock has been smashed lower by the bears over the last six months, with shares down sharply by 64%.

If you take a glance at the chart for Goodrich Petroleum you'll see that this stock has been downtrending badly for the last two months and change, with shares falling sharply lower from its high of $22.61 to its new 52-week low of $7.01 a share. During that downtrend, shares of GDP have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of GDP have now started to bounce higher off its 52-week low and it's beginning to trend within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in GDP if it manages to break out above some near-term overhead resistance levels at $9.48 to around $9.50 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 volume of 2.07 million shares. If that breakout develops soon, then GDP will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $11.80 to $12.09 a share., or even $13 to $14 a share.

Traders can look to buy GDP off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $8.30 to $8 a share. One can also buy GDP off strength once it starts to clear those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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Tile Shop

 

Another under-$10 home improvement stores player that's starting to move within range of triggering a near-term breakout trade is Tile Shop (TTS), which operates as a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the U.S. This stock has been hammered lower over the last six months, with shares down sharply by 40%.

If you look at the chart for Tile Shop, you'll notice that this stock has been trending sideways over the last few weeks, with shares moving between $9.11 on the upside and $8.16 on the downside. This trend is occurring below both of TTS's 50-day and 200-day moving averages, although the 50-day moving average is not far off from current levels. Shares of TTS are now starting to bounce a bit above the lower-end of its range and it's begging to approach a breakout trade.

Market players should now look for long-biased trades in TTS if it manages to break out above some near-term overhead resistance levels at $8.68 to $9.11 a share and then above its 50-day moving average of $9.20 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 501,409 shares. If that breakout hits soon, then TTS will set up to re-test or possibly take out its next major overhead resistance levels at $10.14 to $11.19 a share.

Traders can look to buy TTS off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support at $8.16 a share. One can also buy TTS off strength once it starts to bust above those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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Neonode

 

One final under-$10 technology player that's quickly moving within range of triggering a big breakout trade is Neonode (NEON), which develops and licenses user interfaces and optical infrared touch technology solutions. This stock has been destroyed by the sellers so far in 2014, with shares down huge by 64%.

If you take a glance at the chart for Neonode, you'll see that this stock has been uptrending over the last month, with shares moving higher from its low of $1.72 to its recent high of $2.46 a share. During that uptrend, shares of NEON have been making mostly higher lows and higher highs, which is bullish technical price action. This stock has now started to bounce higher right above some near-term support at around $2 a share and it's beginning to flirt with its 50-day moving average of $2.19 a share. That move is starting to push shares of NEON within range of triggering a big breakout trade above some key near-term overhead resistance levels.

Traders should now look for long-biased trades in NEON if it manages to break out above some near-term overhead resistance levels at $2.30 to $2.46 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 401,551 shares. If that breakout gets underway soon, then NEON will set up re-test or possibly take out its next major overhead resistance levels at $2.80 to $3 a share, or even $3.20 to $3.50 a share.

Traders can look to buy NEON off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $2 to $1.88 a share. One can also buy NEON off strength once it starts to take out those breakout levels with volume and then simply use a stop that sits a comfortable percentage from your entry point.

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 Delafield, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., 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.