I was doing some sector research tonight and came across a company that has a VERY interesting Chart:  Iridex Corporation (IRIX).  It just hit a 52-week high yesterday of $3.34 and the rise has been very steady and very strong over the past month.  Trading off a base of around $2.20, it has offered patient investors a one-month gain of over 50% and a 52-week gain of 227%.

And, what is not to like about IRIX? It is turning a profit, has cash-in-the-bank, has manageable debt and good coverage ratios.  As a recovering CPA, I actually am very impressed with the company.  Investors seem to be, too.  For a small cap (around $25MM) and tiny float of around 5.9 million shares, IRIX has really performed.

Iridex, the company, is a a global leader in developing, manufacturing, and marketing innovative and versatile light-based medical systems and delivery devices.   They offer laser based solutions for multiple specialties including Aesthetic Medicine, Ophthalmology, Veterinary, and Otolaryngology.

My question is when will the stock chart crack? I am seeing a chart that is very overheated, has seen tremendous (for it) buying volume over the past month (i.e. rarely a down day).  See the chart for yourself:

This is a low-volume stock that has had a very prolonged run.  Will it crack?  I don’t know, but it bears watching.  The low volume and small float is worrisome to traders like me (I never like to get caught in a stock).  So, be careful.

There are two ways to play this stock: 1. Short – look for the break below the 50-day MA or weakness in the MACD or, 2. Long – This stock is building an audience and buyers are believing in management and its  prospects are looking too good.

If I was a betting man (I guess I am), I am thinking that IRIX should be watched for a near-term correction.

Good luck and good trading

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