If the pot stocks are down — and they are — then why did I buy Innovative Industrial Properties ($IIPR) today? (January 24, 2020)
IIPR
I want to look at Innovative Industrial Properties ( NYSE: IIPR ); there’s a reason why. This stock is typically not the kind of thing I trade. I would actually prefer to trade this part of the chart; this is the type of setup I look for and even like back here in 2017. There are just various parts of the stock that is in the prevailing uptrend so we are looking to see whether the next move is going to be higher. And so you take a little risk and then lo and behold the next move is higher. Okay, fine, so this is not my deal.
But I do like this pattern; I had, had a position in this stock. In Stock Market Mentor we started one right here, right on this little breakout, that’s why I drew that line there on this little breakout. And then lo and behold the stock pulls back a little bit yesterday. It actually sold off on heavier than average volume yesterday. It’s not like anybody knew that they were going to do a secondary offering of like 3 million more shares and they only have in the float like 11 million, but that was yesterday.
I was still long the stock and so we go into today and the stock trades right at the 50-day moving average to open, that’s 77.76. The stock opens up at $78.00 so it is very close to the 50-day moving average and immediately ran higher. Now, on this kind of news where shareholders are going to be deluded, and by the way, the offering price was at like 73.50 or 73.40, something like that, so it was well below where the stock is trading now.
So with that kind of news, if a stock gaps down and then starts moving higher, that news then is all baked into the stock and you know that. It is not like they’re going to come out and say, “Oh, we really are going to be selling shares.” The news is out; the market is immediately factoring it in. And the factoring in says, “It’s no big deal, it’s good that they are raising more cash. Maybe they can buy more land so the can grow more pot. Yippee.”
The stock moves up here immediately. I actually bought more, which is typically, again, not my trade, frankly. There are a lot of people that like this kind of pattern; I like them up in the upper right-hand corner. But I recognize an opportunity when I see it. As I look at this now I see this washout today, first thing in the morning, massive selling right at the open; most of the selling occurred, during probably the first 2-minutes. So massive selling at the open and then the stock is up, so this is a big washout of sellers right here.
I think the trade for you is, look at support at around $78.00. The stock should not fall back below $78.00. If it is you probably want to be heading for the exits. I would look for the stock to continue moving higher, even if it gets back up to this last high, that’s another 5 percent. That doesn’t sound like much but if it gets up to here and moves a little bit above $85.00; guess what? That’s another higher high.
So we will have a low, a higher high, a higher low. A higher high, a higher low, then we are looking for another high. Pretty soon you have got to say, “Hey, I think this is a base breakout and the stock is in an uptrend. I think I will buy the stock. Oh, wait a minute; I already did buy the stock down here. Maybe I will just buy some more.” That’s how I am trading Innovative Industrial Properties ( NYSE: IIPR ) and I basically just told why.
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