All time closing high for this new IPO. Here’s how you trade Sprouts (SFM)
Discussed in this article: Sprouts Farmers Market Inc. ( $SFM )
I want to look at Sprouts Farmers Market ( NASDAQ:SFM ) today, and here’s why. This really had some people, in the forum today, commenting on this right towards the end of the day. This is really conforming to that IPO strategy, or pattern that I had mentioned a while ago.
The stock printed and all-time high today and it closed at an all-time high as well. I love to see this; after a stock trades were it traded here on the first day, comes up, establishes resistance, here’s resistance right here. So many times, not all the time, so it’s not predictable, but it is factual, it happens a lot, so many times the stock will ultimately come up and test that level and fail. Not necessarily trade down again, but a lot of times it comes up here and it will fail.
This is important for you to know because number one, you don’t want to buy here then, the first time a stocks coming up don’t anticipate the stock’s going to hit an all-time high; well it ultimately did two months later. So don’t be anticipating this in advance, because you’re going to wind up being wrong more than you were right.
Do you know why? Because at the place where supply overwhelms demand, with respect to aggressiveness, price is going to go down, it’s like a lot of reality. That’s exactly what happened here. So I’m looking at this right now, I’m not buying it. I’m not buying it because even though we pushed up higher I don’t have any convincing sign that this is any different than that.
Now, do I think the stock is going to go higher from here? Yes, I do, because I’m watching how this trades, runs up here the first day, and then it’s back there, and then it’s back there, and so I’m just thinking, “Hey, today’s Jimmy Shaker day, this is the day that it’s going to happen, but I don’t know that for sure.”
So let me suggest how to trade this. Look at it on a 5-minute chart. You can see it’s been trading sideways all day long, and then it only ran up right at the end of the day. Why? I couldn’t tell you. They announced earnings last week that were pretty good and so the stock rallied accordingly.
Now, with this, here’s how you trade this stock, you look and say, “All right well, most of the day the resistance was right around 41.50, 41.60, something like that, so this is all the after hours stuff. You can do this in one of two ways: either wait to buy the pullback to about there, my bet is you’ll get it tomorrow.
The markets going to probably be a little bit volatile just because the nature of things, but you get an opportunity probably to buy this stock at or below 41.65. When you’re doing that you’re guaranteeing that you’re not buying at the exact high, maybe you’re taking a little bit of stock, at least you’re using an intraday chart. Or, you can sit here and watch it wait and hope you get more of a pullback.
Another way to do it, and it’s a different trading style, but here I think it actually is the one that I would prefer. Wait for it to break to a new high, 42.51. So you put a price alert at 42.50, 42.55, something like that, and then when your alert gets hit you say, “Okay, well this is now hitting new all-time highs, I want to be in this stock because I think it’s formed a pretty nice base.” If you can just do something like that, it’s going to help you make a heck of a lot of money.