UMAC has strong fundamentals and technical setup for a buy, but recent price drop and low volume create risk.

Okay, this is Dan Fitzpatrick from stockmarketmentor.com, and I want to take a look at an unusual company called " Unbelievable Machines".

Right now, this company is at a really good entry point. I've drawn a chart for this stock and I'll explain it in a moment, but I first realized this company existed...I'm quite sure it was right here at this high level.

I may be a little wrong about the exact date, but what caught my attention was an article I happened to see on the IBD website, and I remember looking at the company, drones and all that stuff, lots of planes, Locats planes and the like, which seems to be the big thing these days.

So, I was watching that and then I looked at the chart, and my conclusion was: Well, this is really interesting, but not with my own money. The stock was not in a good position to buy.

Now, having said that, you can see from the bottom left to the top right, a series of lower peaks and lower troughs. Yes, this level has been broken. So, in Bill O'Neill's language, this will be a new rule.

And frankly, you can even look at this rule. It was also broken. Hardly, but as you know, hardly. This is just as important in technical analysis as it is in hand grenades. So, we can really say that this is a new count of the base.

The stock is in a very good upward trend along the 50-day or 200-day moving average, and I am watching this and I think this is the right time to buy this stock.

Now, the company is experiencing tremendous growth. Second quarter revenues amounted to $16.7 million. It's a fairly small company. Second quarter revenues were $16.7 million, representing an increase of nearly 700% year-over-year and 106% over the previous quarter.

Therefore, the company is doing well and has $230 million in cash. I recorded a loss this quarter, but that happens with startups.

What this company is really trying to do is become the primary supplier of small drones. It's a good deal and a promising field to work in.

What I don't like is that this stock has seen a very large movement . It lost a third of its market value in just 18 days. That is, 12 actual trading days. This was a very sharp decline, and it is difficult to buy because it left behind a trail of painful losses.

Many people are unhappy. Therefore, you can't expect much momentum for any kind of rebound.

Now, if you look at the trading volume here, you will find it is below average. I think this is a warning sign, or a yellow light as I call it. However, it achieved a good upward movement . It broke through a very good closing level.

Honestly, your first deal could be like this. Your first deal can start here. Perhaps even at the close, then you place the stop loss order here at the bottom. The idea is— and by the way, I gave a 30-minute course today on the reasons behind stop-loss orders—to put the stop order below the level at which you look at the trade and say, "Okay, this isn't working."

She's not doing what I thought she would do . This means that every deal can be slightly different . Here I will start the initial trade, then the stock will continue to rise, reaching a higher level than this level here.

So, I'll observe and say that this is a second buying opportunity . We will put this here. I will give you an entry point. Therefore , you would buy the stock right here when it surpasses this previous high.

Now, by the time it gets here, look, it's up about 9% today. When it gets here, you will have raised the stop-loss order for the initial buy order to a level where you are effectively trading at market profits.

You must be able to reach the break-even point. So, if the stock reverses direction, the worst-case scenario for this initial payment is that you make no profit, but you also won't lose anything.

Then in this next step, the stock rises to here, so where will your stop-loss order be ? Well, you know, once again, he'll be right here . So, you are buying from here. I have already made a guaranteed profit , not a big one, but a profit nonetheless.

Now, you have an 8% margin, and you might want to reduce it even more, but I'm just putting forward an idea. About 8% of this. So, you now have double your original position with half the risk.

Then we will observe how the trading for the rest of the session will proceed. So, the only warning sign is that trading volume is slightly below average. So, you need to pay attention to that.