#IPOs – A Great Year For “Dummies”

In the fervor of an initial public offering — an IPO — investors can easily get carried away.

After all, they are being pummeled with positive publicity by underwriters and brokers that this is it – the chance finally to buy into a latest, hot new company! But, in fact, unless one is some kind of insider or maybe a politician being bribed the first day of trading – the stock’s IPO day – is a crap shoot.

Take CRWD (Crowd Strike Holdings), which went public yesterday, as an example. The stock opened at 63.50, rose to 67, dropped to a low of 56, and closed at 58. A gambler might have a strategy to buy in during the day but at what point in that nine point chop does an investor make a safe investment? At no point.

The key to investing in IPOs is the first day’s price range but the buy comes after the first day as suggested in this post here: Buying IPOs for Dummies.

Following a “buying IPOs for dummies” strategy, CRWD is a buy on a close above 67.00 and at no other time. That’s when the initial fervor is over and there may be a worthwhile chance to profit going forward. Otherwise, the stock could drop through the low like LYFT did this year and keep on falling. Everyone who bought LYFT on its first day is losing money but those who did not buy are not.

How has this strategy worked this year so far?

With several companies, just great! SOLY is up 217%, SWAV is up 90%, BYND is up 86%, ZM is up 45% (see the charts below).

PINS is included here as an example of how defense can be played by both the long-term investors and swing traders. PINS rose 29% before falling back below the high of its IPO day for a loss of .9%. Disappointing for the investor, yes, but not catastrophic. Along the way, a trader might pay closer attention – at the bottom of the first big down blue bar on the chart at the right of the chart panel below PINS still had a profit of 17.2%. That would have been a good spot to take some, if not all, off the table.

(click on chart panel for a larger view)

$SNAP #FirstDayBox – Buying an IPO (or not) in one easy lesson…UPDATED

Updated this post from March, 2017, today (5/2/18) with a new chart since SNAP a short below 23.50 last year cashed today to 11 on news Facebook would compete with its Tinder service.

When a hot IPO is launched, as was the case with Snapchat (SNAP) on March 2, the headlines are usually how much it leaped over it initial offer price.  That is a worthless commentary.  Unless one is on some broker’s favored clientele list, it is impossible to have the stock and to be able to sell it on that leap.

So what to do?

With IPOs this is actually one of the easiest decisions in stock trading.  Simply note the high price and the low price on day one of the IPO.  Those are the lines in the sand (see chart 0f SNAP below).

Buy on a close above the high of the first with a stop loss below the high of the first day. With SNAP that buy would have been at 27.09 on March 3 and it would have been stopped out the next trading at at 26.05, a loss of .3% (that’s the way it goes sometimes).  From there, SNAP declined to an all-time low of 18.90 so that stop loss would have saved a lot of money, to say nothing of the anxiety of being locked into a foolish IPO buy made on whatever day.

It would have been a short sell below 23.50 if the stock could have been borrowed (difficult if not impossible this early in the IPO’s life).  Regardless, today the stock is challenging its “First-Day Box” which would stop out any short sale. A drop again below the box would be a signal to again short the stock.

So what to do now?

Basically nothing on the long side.  Until it shows it can trade through its first day, it is not a buy. On the short side (easier to do now) it will be a short on the first down day below the box with the stop loss in the box.

In stock trading there are no easier decision to make than playing off an IPO’s First-day box.

P.S. when a long buy goes well it can become long-term hold as in the case of ACRS, a buy at 12.50 (see the chart below).

(right click on the chart for a better view)

acrs2017-03-27_0830

$KC #Coffee – swing traders’ dream

Coffee has been swinging from oversold to overbought and back again on a consistent basis for more than a year.

Last year, January through December, was spectacular with more than a $30,000 gain on margin (current margin requirement is $3,100 per contract).  This year not as much but still great –$10k plus so far.

Should be noted that the commodity may be in transition.  It appears on a longer term basis coffee has moved from bearish to generally bullish with what appears to be no less than a rounding bottom on the daily chart.

The commodity’s active contract is overbought and can go higher but that trade is on so not worth chasing.  The next trade will be a short.

(for a closer look at the swings right click on the chart)

Coffee_2016-08-24_0852

The world according to $UVXY

The chart below says it all.

The bid is at 25.  For the past year, that has been the level that has reaped enormous rewards for swing traders.  And now the 3x-leveraged ETF is once again heading there.

It will not surprise me if the market rally from February 12th ends on UVXY 25.

(right click on the chart for a larger view)

UVXY_2016-03-14_1206

 

Market – Santa bounce season

It’s Christmas rally time and the stock market could rally the rest of the week.

Nice turn in the market today off Friday’s nasty plunge with divergences all over the place.

For instance, my nifty-50 stock list, after registering an important 40 stocks on sells on the 12/14 drop, could manage 31 on sells on last week’s plunge.

As for other breadth indicators see the green circles on the chart below — plain and simple those often trigger bounces, and bounces can trigger rallies.  In other words, it is likely the market bounces the rest of the week and could maybe rally the rest of the year (just maybe).

I’m looking to TQQQ, TNA and UPRO, the 3X-leveraged ETFs for the major indexes to play the bounce.  Stocks in the nifty-50-list giving new buy signals for tomorrow’s open included EFUT, ZEN, HA, PCRX, AMAT, and WAL.  Big caps giving individual buys signals: WMT, HD, INTC, MMM, SBUX. And there are always futures and options.

(Anything written here should not be construed as investment advice but instead no more than a personal log of my market timing.)

All in all in this traditionally bullish season, it appears one better not pout, and better not cry, because Santa Claus is coming to town.

(right click image for a larger view)

TWITTER_RALLY2015-12-21_1506

#Solar Stocks shine again

Every month or so I’ve written about renewable energy, particularly solar stocks.  Since is been a month since I’ve written about anything here, I thought I’d start up again with this old favorite.

The bottom line in stock selection is “when in doubt buy renewable energy.”

As I’ve said before (back in August, see blog post below):

Always a good sector to buy with any market rally, solar may be the best chance to rack up a 50% gain in the next couple of months.  Longer-term, no matter how volatile, it is a growth sector and preferable in the future to investing in fossil fuel stocks of any kind, particularly better than coal.

As it turned out I may have underestimated the sector.

Witness this past month in solar stocks (right click to view a larger  image):

solar_2015-12-18_0932

 

 

#Stocks on #Nifty50StockList creep into buy signals

Despite a choppy flat day in the general market today, thirteen more stocks in my Nifty50 Stock list generated buy signals today.

There are now 29 on buys with only two overbought while 10 stocks remain oversold.  This is a slow creep to the buy side within the list from the 42 on sells and 26 oversold last Friday.  The advance is tenuous advance in a dicey market environment could turn down again at any moment.

That moment may come tomorrow since the general market, already in negative ground, gave a sell signal today. I am looking for a retest this week of Friday’s drop.

The bears still have the ball.

However…

If this pull back comes and provides divergences in breadth with Friday’s action and has a successful turn to the up side subsequently, we could be begin a rally into Christmas, maybe New Years.

If not, then the bears will still have the ball.

The chart below highlights four of the stocks giving buys today — MANH, RGS, VLO, ADBE.  Of note, several major stocks, either in my list or in the major indexes, including HD, MRK, UTX, MCD in the Dow; and FB, AMZN, GILD, CSCO and AAPL in the Nasdaq 100 also triggered buys.  I don’t have a lot of faith in any of these until the above mentioned general market retest comes and goes.

(click on chart for a larger image)

NW_BUYS2015-11-17_1523.png

$ERX – a leveraged ETF bounce in energy stocks

With today’s pop from oversold in the general market, energy stocks resumed their move as a leading sector.

Had short-term buy signals on nearly every stock I follow in the sector including CNQ, SLB, EOG, PXD, WFT, NOV, NBR, and the ETFs OIH, XLE as well as the 3xLeveraged ERX.

With nothing to confirm this market bounce is anything more than just that, a short-term bounce from oversold, my play is ERX with a very tight stop.

In other words, this is a trade that better go my way right away or I’m going away right away.

(click on chart for a larger image)

ERX2015-11-17_0038