Inca Designs is one penny stock that has had an extraordinary run. I have been watching it for over a month now.  Unfortunately I was not able to catch it in time for the breakout that it recently did. I really thought that IDGI would consolidate sideways for a longer while.

Anyway, the price chart of IDGI is still interesting. But it does have a few challenges ahead that must be meet in order for the bullish case to stay intact. The funny thing about penny stocks is despite the fact that they are so cheap, they still for the most part obey the rules of technical analysis and price and volume relationships.

So what I see right now with Inca Designs is the first blockbuster move from the lows of .0001 area to the red dotted line that marks the .007 level.  That was a big move but then IDGI went into a sideways trading range building cause for the next move. It was not able to break out of the trading range until about 3 months later.  The breakout looks valid in terms of the nice 3 wide price bars, but the volume on the breakout is a bit of a concern to me at this point.  We did under 10 million shares on the breakout.  If you compare that to some of the previous price swings in either March or April you can see just by eyeing it that we are really lacking suitable breakout volume. What you want to see is volume on a breakout that is at least equal to or greater than previous swing volumes.

The other thing to always watch for on breakouts from this type of pattern is a retest of the breakout area.  That is about as common as motherhood and apple pie.  So far we can see that IDGI has fit the bill in that aspect and has now come back down to retest the breakout area and it has been on very light volume which is a good sign.

So it is critical in my opinion that we hold above .007 here in order for IDGI to maintain its up trending ways.  It is quite possible after this retest that we will bounce back up to the .015 area again and then start building another long sideways trading range similar to what happened in March through May.

Aside from the light volume breakout, IDGI is a pretty well behaving penny stock which a lot of the time is a rare thing.  Finding a very well behaved penny stock is really tough these days.

I think I am going to start a new trend here and start to rate the penny stocks that I profile here with a numbering system. 1 will define the absolute most perfect penny stock setup that has ever existed in the history of manking. And 10 will define the absolute worst penny stock setup.  Obviously 5 is going to be right in the middle and make it a 50/50 type setup. So I am going to rate IDGI a ‘3’ right now and think we have a good shot at a testing move back up to .015 which would be a 100% move.

Unico Mining is an OTC BB penny stock that in late May had quite a substantial rally. It was a very powerful rally and I would be so bold as to call that rally a huge sign of strength.  That is what price the nature of the price movement is telling me and it cannot be ignored.

On the popular message boards there is some talk about how this company is a total scam and that the management has time and time again ‘duped’ investors with a dog and pony show only to come up empty with any real results. According to these burned investors, Unico goes through this cycle of pumping up a stock maybe doing some insider buying and then not delivering anything of substantial value in the way of gold production or real concrete progress on their deer trail mine.

If I had a penny for every time I heard the story about how such and such penny stock is a scam, then I would be a very …… (you fill in the blank).

Look, I just do not know if UNCO is just another penny gold mining company that is big on promises but short on results.  That is, I do not know from the fundamental side if that is the case.

But what I do know from the UNCO charting side is that right now we have a fairly good scenario whereby the price of UNCO is at a key decision point and traders and investors have to decide if we have the real deal here or just smoke and mirrors.

The chart is the only thing that matters to me here. I cannot worry about all the other gossip about whether or not they are doing legit business practices and whether or not they will start producing gold in July 2009.

The price chart as you can see in the chart above is at a key juncture and I am going to be watching it very closely tomorrow morning.

If UNCO by the end of the day tomorrow or the other two days of this week is able to get a closing price above that white down trend line shown in the chart above then it could trigger an elliott wave 3 up or new rally in this stock.

On the other hand, if UNCO is not able to achieve that and breaks below .015, then it would invalidate the bullish case, at least temporarily (it could be a false downside shakeout) and open the door to more weakness in price.

So lets let the price decide here what the verdict is. I will be watching this one closely tomorrow and the rest of this week to see if we have any potential here.