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 Thursday, including China Auto Logistics (CALI), which exploded higher by 46%; ITT Educational Services (ESI), which ripped sharply higher 40%; DLH Holdings (DLHC), which spiked sharply higher by 38%; and Echo Therapeutics (ECTE), which soared by 36%. You don't even have to catch the entire move in lower-priced stocks such as these to make outsized returns when trading.
One example of an under-$10 stock I flagged recently that ripped sharply higher was specialty pharmaceutical player Pernix Therapeutics (PTX), which I featured in Sept. 26's "5 Breakout Stocks Under $10 Set to Soar" at around $7.80 per share. I mentioned in that piece that shares of Pernix Therapeutics had been uptrending a bit for a few weeks, with shares moving higher from its low of $6.83 to its intraday high of $7.88 a share. That uptrend was quickly pushing shares of PTX within range of triggering a near-term breakout trade above some overhead resistance at $7.88 a share.
Guess what happened? Shares of Pernix Therapeutics started to trigger that breakout on Oct. 3 with decent upside volume flows. Volume on that day registered 501,000 shares, which is just above its three-month average volume of 457,788 shares. Shares of PTX have continued to uptrend strong since breaking out with the stock tagging an intraday high on Thursday of $9.69 a share. That represents a solid gain of over 20% from the time of my article. Shares of PTX entered new 52-week-high territory on Thursday, which is bullish technical price action. This stock looks destine for $10 a share, or possibly even north of $11 a share if the current uptrend remains intact.
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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Quiksilver
One under-$10 apparel player that's starting to move within range of triggering a near-term breakout trade is Quiksilver (ZQK), which designs, develops, markets and distributes branded apparel, footwear, accessories and related products primarily for men, women and children. This stock has been decimated by the sellers so far in 2014, with shares down sharply by 79%.
If you take a glance at the chart for Quiksilver, you'll notice that this stock has been downtrending badly over the last five months, with shares sliding lower from its high of $6.55 to its recent 52-week low of $1.40 a share. During that move, shares of ZQK have been consistently making lower highs and lower lows, which is bearish technical price action. That move has also seen two trading sessions of large downside volatility where the stock gapped down dramatically with heavy volume. That said, shares of ZQK have now started to spike higher off its 52-week low of $1.40 and it's now moving within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in ZQK if it manages to break out above some key near-term overhead resistance levels at $1.86 to around $2 to $2.03 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 2.98 million shares. If that breakout begins soon, then ZQK will set up to re-test or possibly take out its next major overhead resistance level at its 50-day moving average of $2.33 a share. Any high-volume move above $2.33 and around $2.40 will then give ZQK a chance to re-fill some of its previous gap-down-day zone from September that started at $3 a share.
Traders can look to buy ZQK off weakness to anticipate that breakout and simply use a stop that sits right around some key near-term support at $1.50 or at its 52-week low of $1.40 a share. One can also buy ZQK 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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Arrowhead Research
Another under-$10 biopharmaceutical player that looks ready for a powerful oversold rebound higher is Arrowhead Research (ARWR), which develops targeted RNAi therapeutics in the U.S. This stock has been slammed lower by the bears over the last three months, with shares down sharply by 42%.
If you take a look at the chart for Arrowhead Research, you'll see that this stock has been downtrending badly for the last month or so, with shares crashing lower from its high of $17.42 to its recent 52-week low of $5.47 a share. During that move, shares of ARWR have been consistently making lower highs and lower lows, which is bearish technical price action. During that drop, shares of ARWR have seen dramatic downside volatility with the stock gapping down sharply just a few weeks ago from just over $12 to $5.47 a share. That downside volatility has now pushed shares of ARWR into oversold territory, since its current relative strength index reading is 26. Oversold can always get more oversold, but ARWR has already started to rebound sharply higher and looks ready to add significantly to those gains.
Market players should now look for long-biased trades in ARWR if it manages to break out above Thursday's intraday high of $7.14 a share to some more near-term overhead resistance at around $8 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 4.52 million shares. If that breakout gets underway soon, then ARWR will set up to re-fill some of its previous gap-down-day zone from earlier this month that started just above $12 a share. Some possible upside targets off that move are $9 to $10 a share.
Traders can look to buy ARWR off weakness to anticipate that breakout and simply use a stop that sits right below Thursday's intraday low of $6.27 a share. One can also buy ARWR 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.
Scorpoio Bulkers
One under-$10 shipping player that's starting to trend within range of triggering a near-term breakout trade is Scorpio Bulkers (SALT), which is engaged in the marine transportation of dry bulk commodities. This stock has been smack lower by the sellers so far in 2014, with shares off sharply by 53%.
If you take a glance at the chart for Scorpio Bulkers you'll see that this stock has been dropping dramatically over the last month and change, with shares falling sharply from its high of $8.26 to its recent 52-week low of $4 a share. During that fall, shares of SALT have been consistently making lower highs and lower lows, which is bearish technical price action. That plunge has produced heightened increases in intraday downside volatility, since the stock has swing wildly during that period and had just a handful of up days. Shares of SALT are now starting to rebound off that $4 low and off oversold territory, since its current relative strength index reading is 22. That rebound is quickly pushing shares of SALT within range of triggering a near-term breakout trade.
Traders should now look for long-biased trades in SALT if it manages to break out above some near-term overhead resistance at $5 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 973,314 shares. If that breakout develops soon, then SALT will set up to re-test or possibly take out its next major overhead resistance levels at around $5.50 to $6.08 a share. Any high-volume move above $6.08 will then give SALT a chance to re-test or possibly take out its next major overhead resistance level at it 50-day moving average of $7.02 a share.
Traders can look to buy SALT off weakness to anticipate that breakout and simply use a stop that sits right below Thursday's intraday low of $4.38 a share or around its 52-week low of $4 a share. One can also buy SALT 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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Sungy Mobile
Another under-$10 technology player that's starting to move within range of triggering a major breakout trade is Sungy Mobile (GOMO), which provides mobile Internet products and services that focus on applications and mobile platform development in the People's Republic of China and internationally. This stock has been destroyed by the sellers so far in 2014, with shares off dramatically by 61%.
If you look at the chart for Sungy Mobile, you'll notice that this stock has been downtrending dramatically over the last six months, with shares plunging lower from over $20 a share to its recent 52-week low of $5.90 a share. During that downtrend, shares of GOMO have been making mostly lower highs and lower lows, which is bearish technical price action. This massive downside volatility could now be creating a golden opportunity in shares of GOMO, since the stock has started to reverse its downtrending characteristics earlier this month. Since hitting that $5.90 low, shares of GOMO have now started to uptrend, with the stock moving higher from that low to its intraday high of $7.98 a share. That move has now pushed shares of GOMO within range of triggering a major breakout trade.
Market players should now look for long-biased trades in GOMO if it manages to break out above some near-term overhead resistance levels at $7.98 a share to its 50-day moving average of $8.28 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 229,406 shares. If that breakout develops soon, then GOMO will set up to re-test or possibly take out its next major overhead resistance level at $8.97 a share. Any high-volume move above $8.97 will then give GOMO a chance to re-fill its previous gap-down-day zone from August that started above $10 a share.
Traders can look to buy GOMO off weakness to anticipate that breakout and simply use a stop that sits right below some key near-term support levels at $7.15 to just below $7 a share. One can also buy GOMO 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.
Alcobra
One final under-$10 biopharmaceutical player that's quickly moving within range of triggering a major breakout trade is Alcobra (ADHD), which focuses on the development and commercialization of proprietary drug candidates. This stock has been hammered lower by the bears so far in 2014, with shares off huge by 68%.
If you take a glance at the chart for Alcobra, you'll see that this stock has been the poster child for volatility over the last month, with shares dropping dramatically lower from its high of $21.53 to its recent 52-week low of $5.01 a share. Shares of ADHD even gapped down huge during this downtrend, with the stock crashing from over $15 to $5.88 a share with massive downside volume. That move has now pushed shares of ADHD into extremely oversold territory, since its current relative strength index reading is 24. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful bounce higher from.
Traders should now look for long-biased trades in ADHD if it manages to break out above some near-term overhead resistance levels at $5.90 to around $6 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 materializes soon, then ADHD will set up re-test or possibly take out its next major overhead resistance levels at $7 to its gap-down-day high at around $8 a share. Any high-volume move above $8 a share will then give ADHD a chance to re-fill some of its previous gap-down-day zone that started just above $15 a share.
Traders can look to buy ADHD off weakness to anticipate that breakout and simply use a stop that sits right around its 52-week low of $5.01 a share. One can also buy ADHD 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.
-- 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.
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