Every time the Fourth of July comes around, I start thinking about explosive low-priced stocks. I get more pleasure out of owning a stock whose Price doubles, triples or quadruples in a matter of weeks than I've ever had from watching even the most wonderful fireworks display. Don't get me wrong. I like watching fireworks displays, but when I do, it reminds me of owning explosive low-priced stocks. OK, so how do we find these stocks?

In order to answer this question, let's take a look at some examples of what I'm talking about. We can find good examples by running a search called "Firework Stocks" located in the Delta Searches - Stocks Group of UniSearch. This search is set up to find the price change of stocks over $1.00 per share over the last 26 weeks and sorts them in descending order of percent gain. So the biggest gainers over the last six months are shown at the top of the list. Let's see what we can learn by looking at their graphs.

Since I ran the search as of June 28, I found DayStar Tech, DSTI, at the top of the list. I configured the graph so that volume was shown in the lower portion of the graph instead of RT. The chart for DayStar shows a classic break-out pattern. It's Price flat-lined for several months; then broke-out to new highs on 09/29/04 and again on 11/11/04. It hit five new highs while still under five dollars per share in late January-early February. Our "Teeny Boppers" search in the Strategies - Price-Volume Group of UniSearch is ideally suited to find low-priced stocks hitting new highs in Price.

Now let's look at volume. Notice that there was a spike in volume, i.e., an increase of >100% above Average Volume virtually each time the price hit a new high. Our "Price-Volume Winners" search, which is also in the Strategies - Price-Volume group of UniSearch, finds stocks having a >10% increase in Price and >100% increase in Volume. Both of these searches found DSTI on 02/02/05.

A look at the next 14 or so graphs shows that 11 of these big winners had virtually the same chart pattern, i.e., a long period of flat-lining, a break-out to a new high on high volume and a succeeding new high. The beauty of using these searches is that a good stock will show up more than once because it hits repetitive new highs in Price on high volume. I can't tell you how important it is to look for this chart pattern because most of the low-priced stocks hitting new price highs on high volume will not continue to go up for very long. When, however, you find stocks that were dormant for a long time; then explode upward on high volume and repeat the act, you're on your way to Finding Firework Stocks.

P.S. Next week I'll show you how to find low-priced stocks that are in the early stages of becoming "Firework Stocks."