Can a dummy become a genius?
With the right setup and a dose of luck, in stock trading, of course. Maybe not to the level I am about to chart (see below), but it happens more often one might think.
It’s the setup that creates the luck. And it takes persistence and experience to recognize the opportunity, and discipline to play it out.
In this link in early August – Buying IPOs For Dummies— I suggested the setup:
In the tradition of the “For Dummies” books, I give you the short and sweet on trading and/or investing in IPOs:
Buying into an IPOs is actually one of the easiest decisions in stock investing but never let a broker con you into doing it the day of the offering.
Instead, note the high price and the low price on the first IPO is traded. Those are the lines in the sand or the Darvas box around the first day of trading (see the charts below). The time to buy, invest, is on a close above the high of the first day with a stop loss below the high of the first day.
That is usually a low-risk trade since the real good news comes when the stock proves it can move up from all the hype surrounding the offering itself and if it falls back the stop to exit can close by and obvious – either below the high of the opening day or below the low of the opening day depending one’s own time parameters and risk tolerance.
Whatever the latest stock IPO, there is nothing more to say except maybe “Keep it simple, dummy!”
That having been said, let’s take TLRY (Tilray, Inc.), a timely recent IPO launched in the wake of the Canadian legalization of all marijuana products.
Talking about smokin’ hot! According to the setup (see the chart below), that was a buy at the $29.77 close the day after its IPO day, July 20th. If one happened to gamble on it as it gaped above its IPO high that day at $24.25 or so, all the better. At $29.77 it is now up 400% in two months.
This is a stock!
Granted this doesn’t happen this big this often — this took a MASSIVE DOSE OF LUCK — but it does happen regularly to a lesser degree (maybe I’ll bring up MESA next time).
By the way, if TLRY breaks that fast average on the chart be ready to get out of Dodge. That’s a parabolic and it’s likely to be a violent break. In fact today (at the moment) looks like a blow off. Might want to leave town any minute…