IDGI Inca Designs needs to hold support here

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.

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