I rarely trade a stock that is priced under $15. I’ve found that cheap stocks are usually cheap for a reason.
However, I’m not so stubborn in my ways that I refuse to acknowledge that lower-priced stocks can (and do) make traders a tremendous amount of money. When lower-priced stocks do surge higher, they normally excel at a much faster rate than higher-priced stocks.
A trader CAN do very well with stocks priced $10 and lower.
But before jumping into these low-priced stocks, you need to recognize the added risk involved.
These stocks are much more volatile, they can be manipulated by other traders much more easily, and a lot of stocks that trade at such low prices are very poor, suspicious, and even dangerous “penny” companies.
For this reason, you need to be VERY selective about which stocks you choose to trade from this group. In general, you shouldn’t allow one of these stocks to account for a very significant portion of your portfolio.
You also want to make certain that the $10-and-under stocks you trade have already produced stellar earnings (and aren’t just hoping to in the future). This single requirement will help you avoid the majority of the “crapshoot” stocks that often reside in this under-$10 world of stocks.
With these warnings in mind, here are the 10 hottest stocks under $10 that Darvas traders should be watching.
BGCP – This solid earner has fallen to its 50-day moving average line for the first time since August. Look for it to consolidate here and then perhaps bounce higher.
EGOV – This stock is actually forming a Darvas Box just above the $10 mark. It has now produced two consecutive quarters of 50% earnings increases and that trend is expected to continue.
FLL – This stock was a classic “value” play just six months ago and it has now surged into the “growth” category as gaming companies everywhere have rebounded significantly. FLL currently trades in a classic Bull Flag Darvas Box right around the $4 mark.
GLDD – This dredging and demolition company isn’t your typical growth story, but this company is growing quickly and its stock price is a reflection of that growth.
GSIT – This big-time earner recently hit resistance at the $10 mark and is now consolidating within a Darvas Box. You won’t find much better fundamentals for a stock trading this low.
HLIT – This stock has been flagging lower all month, but it’s now testing the 50-day moving average line. Keep an eye on it here.
LMLP – Rarely do you see a $3 stock with such strong fundamentals. So far, this stock has managed to maintain its 50-day line and continue its trend higher. The fundamental caution flag here is a low Return on Equity percentage.
MGIC – This software company has stellar earnings and is just now working its way out of a nice-looking Rounded Base. We’re seeing some excellent price-volume action here.
SOLR – This big-earning solar stock actually just broke ABOVE the $10 mark earlier this month. It’s continuing to surge higher and is maintaining the 10-day moving average line so far. I’d like to see this stock consolidate and form a decent base sometime soon.
STV – This hot Chinese stock is testing the 50-day moving average line for the first time since November. So far, it looks to be finding support at this line.