Stock Quotes in this Article: AOI, ASTM, DRWI, SMCI, ADNC, ACTV

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.

 

Just take a look at some of the hot movers in the under-$10 complex from Wednesday, including YM BioSciences (YMI), which skyrocketed by 76%; DayStar Technologies (DSTI), which exploded by 41%; Renesola (SOL), which soared by 31%; and AspenBio Pharma (APPY), which surged by 30%. 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 exploded to the upside was Audience (ANDC), which I highlighted in Oct. 11's “5 Stocks Under $10 Set to Soar” at around $5.83 a share. I mentioned in that piece that shares of ADNC had gapped down in September from over $18 to a low of $5.80 a share with huge downside volume. Following that move, shares of ADNC entered extremely oversold territory, since its relative strength index (RSI) reading was registering below 20. I highlighted how the stock was also starting to rebound and move within range of triggering a near-term breakout trade above $5.84 to $6 a share and then above $7.20 to $7.36 a share.

 

Guess what happened? Shares of ADNC went on to trigger that breakout just a few weeks later with decent upside volume flows. The stock has continued to trend higher and has now moved into its previous gap down zone from back in September. Shares of ADNC have soared since my piece with the stock hitting a recent high of $10.02 a share. That's a massive gain in a just a few months for anybody who took that trade. Shares of ADNC still look poised for much higher prices if the stock can now trigger another breakout trade above $10.02 with high volume. Lots of that previous gap could still get filled, so keep this name on your trading radar.

 

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

Active Network

One under-$10 stock that's trending very close to triggering a major breakout trade is Active Network (ACTV), which is provide applications that form an online network connecting a fragmented and diverse group of activity and event organizers with a large base of potential participants.

This stock has been destroyed by the sellers so far in 2012, with shares off by 62%.
If you take a look at the chart for Active Network, you'll see that this stock gapped down in early November from over $9 to a low of $5.02 a share with massive downside volume. Following that move, shares of ACTV went on to hit a new 52-week low of $4.60 a share. The stock then proceeded to form a double bottom at $4.60 to $4.64 a share, and it has now started to rebound and move within range of triggering a major breakout trade. That breakout will hit once ACTV clears some near-term overhead resistance levels and its gap down day high of $6.39 a share.

Traders should now look for long-biased trades in ACTV once it manages to break out above some near-term overhead resistance levels at $5.32 to $5.66 a share and then once it takes out more overhead resistance levels at $5.87 to $6.39 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 1,155,670 shares. If that breakout hits soon, then ACTV will set up to re-fill some of its previous gap down zone that started above $9 a share. Some possible upside targets are its 50-day at $7.29 to $9 a share.
Traders can look to buy ACTV off weakness as long as it holds its double bottom levels at $4.64 to $4.60 a share. I would use a stop just below those levels. You can also buy off strength once ACTV clears those breakout levels with volume and then simply use a stop at around $5 a share.

Aastrom Biosciences


Another under-$10 stock that's just starting to trigger a near-term breakout trade is Aastrom Biosciences (ASTM), which is a regenerative medicine company engaged in clinical development of autologous cell products for the repair or regeneration of multiple human tissues, based on proprietary Tissue Repair Cell Technology.

This stock has been hammered lower during the last six months, with shares off by 37%.
If you take a look at the chart for Aastrom Biosciences, you'll notice that this stock had been downtrending badly from July to late November, with shares falling from over $2 a share to its recent low of $1.11 a share. During that downtrend, shares of ASTM were consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ASTM have just started to rebound off that low of $1.11 low and enter near-term breakout territory. During the last month, shares of ASTM have reversed its downtrend now that the stock is making higher lows and higher highs as it flirts with a near-term breakout trade.
Market players should now look for long-biased trades in ASTM once it breaks out above some near-term overhead resistance levels at $1.35 to $1.36 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 168,221 shares.

At last check, ASTM has hit an intraday high today of $1.42 and volume is already tracking in above its three-month average action. If ASTM can maintain this breakout, then the stock will set up to re-test or possibly take out its next major overhead resistance levels at $1.57 to $1.85 a share. Any move above its 200-day at $1.87 will then put $2 to $2.10 into focus for shares of ASTM.
Traders can look to buy ASTM off any weakness as long as it's trending above some near-term support levels at $1.26 to $1.22 a share. One can also buy off strength as long as ASTM is trending above those breakout levels with strong upside volume flows.

Alliance One International

One under-$10 name that's trending very close to triggering a near-term breakout trade is Alliance One International (AOI), which is a supplier of quality tobacco products and innovative solutions to the world's manufacturers and marketers of tobacco products. This stock has shown modest strength so far in 2012, with shares up 23%.

If you take a look at the chart for Alliance One International, you'll notice that this stock has been uptrending for the last month and change, with shares moving higher from a low of $2.87 to its recent high of $3.39 a share. During that uptrend, shares of AIO have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AOI within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in AOI once it manages to break out above some near-term overhead resistance levels at $3.39 to $3.41 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 177,021 shares. If that breakout hits soon, then AOI will set up to re-test or possibly take out its next major overhead resistance levels at $3.63 to $3.70 a share, or possibly even $3.90 to $4 a share.
Traders can look to buy AOI off any weakness and simply use a stop that sits right around its 50-day moving average of $3.17 a share. One could also buy AOI 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 $3.24 a share.
 

DragonWave

Another under-$10 name that's trading very close to triggering a big breakout trade is DragonWave (DRWI), which is a producer of high-capacity packet microwave solutions which transmit voice, video, and data over broadband connections. This stock has been hammered by the sellers so far in 2012, with shares down by 32%.

If you take a look at the chart for DragonWave, you'll notice that this stock has been uptrending modestly for the last month, with shares moving higher from its low of $1.75 to its intraday high of $2.39 a share. During that uptrend, shares of DRWI have been mostly making higher lows and higher highs, which is bullish technical price action. This stock has also just started to bounce off its 50-day moving average of $2.21 today and it's quickly moving within range of triggering a big breakout trade.
Market players should now look for long-biased trades in DRWI once it manages to take out some near-term overhead resistance levels at $2.50 to $2.52 a share and then once it clears more overhead resistance at $2.72 to $2.91 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 210,234 shares. If that breakout triggers soon, then DRWI will set up to re-test or possibly take out its next significant overhead resistance levels at $3.20 to $4 a share.
Traders can look to buy DRWI off any weakness and then simply use a stop that sits right around some key near-term support at $1.92 a share. One could also buy DRWI off strength once it takes out those breakout levels with volume and then simply use a stop that sits right around its 50-day at $2.21 a share.

Super Micro Computer

One final under-$10 name that's trending very close to triggering a major breakout trade is Super Micro Computer (SMCI), which develops and provides high performance server solutions based upon an innovative, modular and open-standard architecture. This stock has been hit hard by the bears so far in 2012, with shares off by 39%.
If you take a look at the chart for Super Micro Computer, you'll see that this stock has been uptrending strong for the last month and change, with shares soaring from a low of $7.85 to its recent high of $9.66 a share. During that uptrend, shares of SMCI have been consistently making higher lows and higher highs, which is bullish technical price action.

That move has now pushed shares of SMCI within range of triggering a major breakout trade.
Traders should now look for long-biased trades in SMCI once it breaks out above some near-term overhead resistance at $9.66 a share with high volume. Look for a sustained move or close above $9.66 with volume that registers near or above its three-month average action of 264,373 shares. If that breakout triggers soon, then SMCI will set up to re-test or possibly take out its next major overhead resistance levels at $11 to $12.50 a share, or possibly even its 200-day at $13.49 a share.
Traders can look to buy SMCI off any weakness and simply use a stop that sits either below its 50-day at $8.93 a share or just below some more support at $8.50 a share.

One could also buy SMCI off strength once it clears $9.66 a share with volume and then simply use a stop that sits just below its 50-day moving average of $8.93 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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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.