Here's an interesting piece of market psychology for 2017: some of the biggest gains in this market are coming from the lowest-priced stocks.
That's not a new phenomenon. In fact, we also saw that happen last year, when the best-performing 10% of S&P 500 components started 2016 with an average price that was approximately just half the average price of the rest of the index. When all was said and done, the average S&P component that started last year below $15 ended with 27% gains, stomping the average return that most investors saw.
This year, some of the most interesting trading setups for the month ahead are showing up in stocks that trade for $10 or less. Just so we're clear, a low share price doesn't necessarily mean that we're talking about a small company, or even a "cheap" one by valuation standards-in fact, by itself, share price isn't a very useful metric at all.
But it's true that lower-priced stocks do tend to trade more actively than pricier stocks of similar market capitalization. We've already seen how low price correlated with high returns last year.
And when stocks under $10 start making moves, the gains can be substantial on a percentage basis.
That's why we're taking this technical look at five under-$10 stocks today.
