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IPO Bases: Why Staying Patient Pays Off
I discussed "IPO Bases" as part of my pre-IPO analysis of $SNOW.
This component of technical analysis is especially pertinent given all of the recent exciting IPOs.
So what is an IPO Base and when should you invest?
A thread
I discussed "IPO Bases" as part of my pre-IPO analysis of $SNOW.
This component of technical analysis is especially pertinent given all of the recent exciting IPOs.
So what is an IPO Base and when should you invest?
A thread
1/ New IPOs draw a lot of attention and excitement. Volatility can occur as investors gauge the market's demand for the stock.
You can avoid this volatility and start a position at a higher reward / risk entry point by waiting for an IPO base.
It improves your odds of success.
You can avoid this volatility and start a position at a higher reward / risk entry point by waiting for an IPO base.
It improves your odds of success.
2/ Characteristics
- Peak to trough: ~20% max - can be up to 50% in volatile markets
- Duration: Usually less than 5 weeks
- Start: Within 25 trading days of IPO
- Entry Point: $0.10 above prior high
- Strong price gain on breakout on volume; close in upper 1/2 of range
- Peak to trough: ~20% max - can be up to 50% in volatile markets
- Duration: Usually less than 5 weeks
- Start: Within 25 trading days of IPO
- Entry Point: $0.10 above prior high
- Strong price gain on breakout on volume; close in upper 1/2 of range
3/ Example: $ROKU
The $ROKU IPO was on September 28, 2017
Its IPO base started forming the next day
It formed a base over four weeks: Depth of 38%, Buy Point $29.80 (Weekly - Image 1)
On 11/9 and 11/10 it gapped up on higher volume (Daily - Image 2)
1 Year post-IPO (Image 3)
The $ROKU IPO was on September 28, 2017
Its IPO base started forming the next day
It formed a base over four weeks: Depth of 38%, Buy Point $29.80 (Weekly - Image 1)
On 11/9 and 11/10 it gapped up on higher volume (Daily - Image 2)
1 Year post-IPO (Image 3)
4/ Example: $MDB
$MDB IPO was on 10/19/17
It started forming a base immediately over the next 18 weeks, 28% depth (Image 1)
The stock proceeded to break out on higher volume (Image 2)
Its first year of trading saw a run up from $34 to $84 (Image 3)
$MDB IPO was on 10/19/17
It started forming a base immediately over the next 18 weeks, 28% depth (Image 1)
The stock proceeded to break out on higher volume (Image 2)
Its first year of trading saw a run up from $34 to $84 (Image 3)
5/ So what about a current example: $API
The $API IPO was on June 26, 2020
Its IPO base started forming in its 3rd week of trading
It has formed its IPO base over 11 weeks, depth of 48%
Look for potentially huge gains if it passes $57.50 on higher volume
Current chart here
The $API IPO was on June 26, 2020
Its IPO base started forming in its 3rd week of trading
It has formed its IPO base over 11 weeks, depth of 48%
Look for potentially huge gains if it passes $57.50 on higher volume
Current chart here
Conclusion
Waiting for a new IPO to form a base can allow investors to avoid volatility and build a position at a higher reward / risk entry point.
While the characteristics may change, the framework stays the same.
My $SNOW analysis is here: https://twitter.com/SeifelCapital/status/1300925246455775232?s=20
Waiting for a new IPO to form a base can allow investors to avoid volatility and build a position at a higher reward / risk entry point.
While the characteristics may change, the framework stays the same.
My $SNOW analysis is here: https://twitter.com/SeifelCapital/status/1300925246455775232?s=20
Finally, h/t to @mwebster1971 who put in all the time, energy, and research brainpower to identify this pattern. It's a truly remarkable accomplishment!
Also, thanks to @TheMarkCooke for identifying Mike's role here.
Also, thanks to @TheMarkCooke for identifying Mike's role here.
