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 on Friday, including Silver Bull Resources (SVBL) , which is ripping higher by 33%; Cellectar Biosciences (CLRB) , which is jumping higher by 23%; Gain Capital (GCAP) , which is surging higher by 21%; and Servicesource International (SREV) , which is moving to the upside by 18%. 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.
North Atlantic Drilling
If you take a glance at the chart for North Atlantic Drilling, you'll notice that this stock has recently formed a double bottom chart pattern at $5.41 to $5.46 a share. That bottom has occurred after shares of NADL came out of a nasty downtrend that took the stock lower from September to mid-October from $10.88 to $5.41 a share. Shares of NADL are now starting to spike higher off those support levels and it's quickly moving within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in NADL if it manages to break out above some near-term overhead resistance levels at $6.39 to $6.51 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 959,192 shares. If that breakout hits soon, then NADL will set up to re-test or possibly take out its next major overhead resistance levels at $7.20 to its 50-day moving average of $7.44 a share, or even $8 to $8.50 a share.
Traders can look to buy NADL off weakness to anticipate that breakout and simply use a stop that sits right around those double bottom support levels at $5.46 to $5.41 a share. One can also buy NADL 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.
Blue Earth
Another under-$10 stock that's moving within range of triggering a big breakout trade here is Blue Earth (BBLU) , which provides energy efficiency and alternative/renewable energy solutions for small and medium-sized commercial and industrial facilities. This stock has been decimated by the sellers so far in 2014, with shares down sharply by 47%.
If you take a look at the chart for Blue Earth, you'll notice that this stock recently gapped down sharply from over $2.50 to its new 52-week low of $1 a share with heavy downside volume. Following that plunge, shares of BBLU have quickly rebounded and the stock has now started to trend sideways between $1.22 on the downside and $1.85 on the upside. This stock is now starting to trend within range of triggering a near-term breakout trade above the upper end of that recent sideways trending chart pattern.
Market players should now look for long-biased trades in BBLU if it manages to break out above some key near-term overhead resistance levels at $1.50 to $1.85 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 483,928 shares. If that breakout begins soon, then BBLU will set up to re-fill some of its previous gap-down-day zone that started just above $2.50 a share.
Traders can look to buy BBLU off weakness to anticipate that breakout and simply use a stop that sits just below some key near-term support at $1.22 a share. One can also buy BBLU 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.
Rock Creek Pharmaceuticals
One under-$10 pharmaceutical player that looks ready to make a large move higher is Rock Creek Pharmaceuticals (RCPI) , which focuses on the research, development and commercialization of compounds and formulations targeting inflammatory and neurological disorders. This stock has been annihilated so far in 2014, with shares down huge by 76%.
If you take a glance at the chart for Rock Creek Pharmaceuticals, you'll notice that this stock has formed a major bottoming chart pattern over the last two months, with shares finding buying interest each time it has pulled back to around 24 cent per share. That bottom is occurring after shares of RCPI downtrended badly for the last five months, with shares falling sharply from 80 cents per share to 24 cents per share. That said, shares of RCPI have now started to spike modestly higher off that major bottom zone, and it's starting to push within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in RCPI if it manages to break out above some near-term overhead resistance levelsat its 50-day moving average of 29 cents per share to 30 cents per 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 volume of 828,865 shares. If that breakout develops soon, then RCPI will set up to re-test or possibly take out its next major overhead resistance levels at 34 to 37 cents per share, or even 42 to 45 cents per share.
Traders can look to buy RCPI off weakness to anticipate that breakout and simply use a stop that sits right below that major support zone around 24 cents per share. One can also buy RCPI 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.
China XD Plastics
Another under-$10 specialty chemical player that's starting to move within range of triggering a big breakout trade is China XD Plastics (CXDC) , which is engaged in the research, development, manufacture and sale of modified and engineering plastics products primarily for use in the fabrication of automobile parts and components in the People's Republic of China. This stock has been hammered by the sellers so far in 2014, with shares off sharply by 34%.
If you look at the chart for China XD Plastics, you'll notice that this stock has possibly formed a major bottoming chart pattern over the last two months, with shares finding buying interest at around $5.25 to $5.05 a share. Shares of CXDC are now starting to bounce notably higher off those support levels and are beginning to move within range of triggering a big breakout trade.
Market players should now look for long-biased trades in CXDC if it manages to break out above some near-term overhead resistance levels at its 50-day moving average of $5.87 a share to $5.95 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 214,340 shares. If that breakout starts soon, then CXDC will set up to re-test or possibly take out its next major overhead resistance levels at $6.39 to its 200-day moving average of $6.46 a share. Any high-volume move above those levels will then give CXDC a chance to tag $7 a share.
Traders can look to buy CXDC off weakness to anticipate that breakout and simply use a stop that sits right below some key near-termsupport levels at $5.11 to $5.05 a share. One can also buy CXDC 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.
Computer Task Group
One final under-$10 stock that's quickly moving within range of triggering a major breakout trade is Computer Task Group (CTG) , which operates as an information technology (IT) solutions and staffing services company in North America and Europe. This stock has been destroyed by the sellers so far in 2014, with shares down large by 53%.
If you take a glance at the chart for Computer Task Group, you'll notice that this stock has downtrended and collapsed over the last four months, with shares moving lower from its high of $17.38 to its new 52-week low of $8.45 a share. During that downtrend, shares of CTG have been consistently making lower highs and lower lows, which is bearish technical price action. That move has also pushed shares of CTG into extremely oversold territory, since its current relative strength index reading is 27. Shares of CTG are now starting rebound modestly off that $8.45 low and it's starting to trend within range of triggering a major breakout trade.
Traders should now look for long-biased trades in CTG if it manages to break out above some near-term overhead resistance levels at $8.95 to $9.25 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 109,629 shares. If that breakout materializes soon, then CTG will set up re-test or possibly take out its next major overhead resistance levels at $11.15 to its 50-day moving average of $11.25 a share, or even $11.84 to $12.22 a share.
Traders can look to buy CTG off weakness to anticipate that breakout and simply use a stop that sits right around its new 52-week low of $8.45 a share. One can also buy CTG 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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