The IPO (Initial Public Offering) Market is one group of stocks that stays on my watch list year around. Because these are normally stocks issued by smaller, younger companies they carry with them a higher risk (and often a higher reward). These names haven’t traded as long or reported earnings over a long period of time, so they tend to trade on pure technicals and market sentiment.
For this group in particular I like to utilize Finviz, a free stock screening tool. Since I am an options trader I adjust the average volume to Over 500k and I change the IPO Date to In The Last Year. You can always adjust these settings to your own preference as well as add in other variables as you see fit. I use those just to give me an overview of the group. Then, you can take a quick look at the charts of them to get a sense of their overall trend.
s you can see, Finviz makes it easy to scan through a group of thumbnail charts quickly and easily to get a sense of how the group is trading. We can see that some have broken out and are in uptrends, others are in a pattern of price acceptance and coiling up, while the rest are slowly and quietly in downtrends with little volatility. I don’t want to chase stocks up, paying more for them and putting myself in a position to take heat on a trade early. The goal is to find a couple in this group that are coiling up or in a falling wedge as they are easy to manage. And, hopefully they follow the others that are already in an uptrend trading to new highs.
My interest is in the following: $YUMC $ZTO and $LN.
1. $YUMC
YUMC is coming into an area of support as it approaches $26.50. It was bid up recently on substantial volume and is falling on low volume. I would look to initiate a position here or a bit lower in the April 30 strike calls around 50 cents. That gives the idea plenty of time to work as it is an OTM play.
2. $ZTO
YUMC is coming into an area of support as it approaches $26.50. It was bid up recently on substantial volume and is falling on low volume. I would look to initiate a position here or a bit lower in the April 30 strike calls around 50 cents. That gives the idea plenty of time to work as it is an OTM play.
2. $ZTO
ZTO is just breaking above recent downtrend. I am waiting for a pull back to the break above $12.50 and will look to get long there. Calls in $ZTO at the $12 or $13 strike into March is where I will look to take a position.
3. $LN
No easier trade to manage than one that is near its all time lows. I like calls here. The $32.50 strike calls in March are just under a $1. I am long these now.
Keeping a basket of IPO stocks on watch has led me to some sizeable gains in the past. Also, watching them as a group helps me keep a pulse on the market. A strong IPO market can be a signal of market strength overall. I always use option strategies in these names as that is the best way to define risk. There is always a chance that one of these becomes the next Apple, but 99.9% of them won’t. Use them for what they are: New companies with stocks that can serve as great trading vehicles.
@omahacharts