Here is my take on Upstart ($UPST) – May 18, 2021
UPST
I want to look at Upstart ( NASDAQ: UPST ). I talked about this stock yesterday in Stock Market Mentor to our premium members, noting that this is, (1) that it was a pretty volatile stock so we needed to respect that. But if we got a breakout here we could definitely see much higher prices because that’s what IPO stocks do, and so this would only be for active traders. It’s just not something you want to mess around with if you don’t know what you are doing.
But in the kind of market that we are having right now, this is a stock that could work. I had mentioned yesterday, don’t just buy the stock. I said, if the stock breaks out above yesterday’s high, that’s when you want to buy it and this is why; because with this kind of volatility a stock that breaks out is going to get a lot of FOMO.traders who want to get this stock before it goes much higher. I think that is going to happen tomorrow. Of course, I could be wrong. I am not predicting anything but that’s what I think.
If we look at the 15-minute chart you can see, the 17th, that’s yesterday, had a nice smooth move higher. Today, the 18th, the high was set at the first part of the day. By the end of a half or an hour of trading this thing had peaked, but it didn’t fall back very much. Instead, this thing formed a bit of a trading box right around here. And then right towards the close this started to move higher and it had a pretty strong close relative to what’s happened before.
So here’s my suggestion, if you are a short-term trader you look at the daily chart. Today the stock closed at 124.90, I would put in a limit order to buy the stock at 124.95 or maybe 125.00 if you like the even number. The reason is if you wait for the stock to be breaking out you lower your risk dramatically. You could say, if I am buying it higher how can I be lowering my risk dramatically? I will tell you why, because there is a lot more to risk management and protection than stop losses. Of course, you should use those but you also want to be looking at what’s the likelihood that my trading theme or idea or what my strategy is, what are the odds of that actually working?
If you are saying, I want to buy this now at 119.49 so that I can make all of this money WHEN the stock breaks out you are kind of missing the point of trading, because you don’t know whether the stock is going to breakout. So you actually risk losing money if the stock DOESN’T breakout. On the other hand, if you say, I want to KNOW that the stock is breaking out because IF the stock is breaking out I can buy with move confidence and I can also set a tighter stop because I will know when I am wrong. If the stock breaks out and then starts pulling back to below 119.00, then I have to say, alright, that’s it, I am out of here, I missed the breakout. Or the breakout reversed and so I need to get out.
The point is, you are always protecting your downside with a stop but your stop is placed relative to where you bought the stock. Like, why did you buy the stock where you did? If you don’t know why you bought the stock where you did any stop will do, just put it someplace, it doesn’t matter. If it didn’t matter to you, why you bought, where you bought, it shouldn’t matter to you where you sold. It’s a fun little game, this trading, it’s gambling. If you are doing it right you want to wait until the stock breaks out to a new high and that’s when you want to buy it. And remember, these are volatile stocks, these IPOs. But this one now is working. And so if it does certainly I could see this testing 140.00. After that, I don’t know, I am not going to predict that
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