Thinking about trading IPOs? Buy when everyone’s a winner! (February 21, 2017)
TTD
I want to look at The Trade Desk ( NASDAQ:TTD ) here. First of all, earnings aren’t an issue, almost 12 percent of the float is short. The reason I want to show this to you is because it conforms to this IPO strategy that I first talked about several years ago. But the idea is this: After a stock hits what I call, for a lack of a better term, an enthusiasm high (if anybody has any imagination better than mine let me know), where the stock opens up, wherever it opens up, and ultimately peaks out here at this level. Because at some point the buying frenzy is done and then the stock implodes because that is just kind of what happens; look at Facebook ( NASDAQ:FB ), the same thing happened to that.
But then if you keep track of where that enthusiasm high was, just draw a line over to infinity, at some point hopefully that stock is going to breakout to a new high. When that happens everybody is a winner. Everybody who has ever owned this stock is a winner. It is effectively an all-time high. Every day it hits a new high, it is an all-time high, “Winner, winner, chicken dinner,” we are all happy. What you see in situations like this is, the stock just continues to move, it gets momentum and just continues to move higher. Now, you can say, “Well, why would I want to do that and wait for this? Because look at all the moves that it has had.” And you would be correct. But what I am talking about is this one specific strategy and it works time, and time, and time again.
Here, with The Trade Desk ( NASDAQ:TTD ), here is the 50-day moving average, we needed 50-days of trading before this came into existence; but the times to really buy were on these pullbacks to the 50-day moving average. But now this stock has broken out. I think on just pure momentum you can expect higher prices from here. Know that it is a fairly risky trade, because it has gone up so much. But this big shakeout on Friday; huge, huge volume. Now the stock is eclipsing that, virtually all of it with a higher high and a higher low intraday. So I think the move here to be made is to be buying The Trade Desk ( NASDAQ:TTD ).
Now we will look at another stock, Chemous Company ( NYSE: CC ). This has been trading for a while, but you can see, even with a stock that goes clear back to 2015, once the stock hits this all-time high; this is what I am talking about, it can accelerate. Plenty of trades to be had between here and here. But what I would suggest doing is, keep track of IPOs and Bridget, my trading assistant, tracks a bunch of them and puts them in her notes in the Forum every night (I just can’t cover them all-day long), but they work. If you just wait for a stock, an IPO, to pullback from it’s high, be patient, set an alert, so whether it is tomorrow or a year from tomorrow that alert gets hit and the stock starts hitting a new high, you can know that everybody in there is a winner. There is not going to be any, “Oh crap, I just want to get my money back trades.” You are going to see the stock trading higher.
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