Trade IPOs
What is an IPO ?
The first sale of stock by a private company to the public also known as Initial Public Offering by a Company.
IPO Basics: Don't Just Jump In.
Things to remember:
- We are NOT recommending to BUY an IPO on 1st day, as soon as it is listed on the stock exchange.
- Unless you have insider information and understand company financials/business, it is NOT wise to invest in IPO on 1st day or before it is listed.
- Buying IPO on 1st day (when it is listed on the stock exchange) does NOT provide any edge.
If IPOs are so risky then why are we discussing it here?
No doubt, IPOs are risky but they also provide significant returns in very short time if traded properly.
Lets take a look at below charts:
Observations:
Strategy: When & How to trade IPOs?
Step 1:
So far so good!!!
Things to remember:
Now that we understand how to trade IPO and have a strategy, where do we find such a list?
Not to worry, we have created a list of IPOs in last year. The list will also help you to identify IPOs which are within 15% of their all time HIGH price point. All you need to do is watch the list on daily basis for potential BUY candidates. Check last 2 images in above slide show which explains it.
Good Luck!
- BUY opportunity is shown ONLY when IPO stock breaks all time HIGH
- Once the all time HIGH is broken, stock moves very fast in very short time frame
- Significant gains over next couple of weeks or months
- SELL if IPO stock drops below MA(21) line to lock in gains
- Always make sure you have STOP LIMIT in place to avoid massive losses as IPOs are risky investment
Strategy: When & How to trade IPOs?
Step 1:
- Get a list of all IPOs in last 1 year
- Identify IPOs which are within 10% of their 52 week high price point
- Look for IPOs which are consolidating near 52 week high area
- ONLY BUY when stock breaks out of 52 week high area
- Immediately have STOP LIMIT in place
- As long as stock remains above MA(21) area, continue to hold
- SELL if stock drops below MA(21) area OR have 5-10% trailing STOP LIMIT
- Do take partial profits (by selling 50% position) once stock gains more than 20% to lock in gains
So far so good!!!
Things to remember:
- IPOs can provide significant gains in short time frame during BULL markets
- IPOs act as BULL TRAP during market corrections or BEAR markets
- ALWAYS have STOP LIMIT in place as IPOs can take immediate U-turn
- Do watch for IPO daily trading volume (# of shares traded daily) so that it has enough liquidity
Now that we understand how to trade IPO and have a strategy, where do we find such a list?
Not to worry, we have created a list of IPOs in last year. The list will also help you to identify IPOs which are within 15% of their all time HIGH price point. All you need to do is watch the list on daily basis for potential BUY candidates. Check last 2 images in above slide show which explains it.
Good Luck!