Don’t just apply this analysis to PSX — apply it to all of your IPO stocks. If you used this strategy, you wouldn’t have bought Facebook when it first began trading. (November 28, 2012)
PSX FB
I’m Dan Fitzpatrick at StockMarketMentor.com on Wednesday, November 28th. In this video I want to look at PSX, that’s Phillips 66 ( $PSX Phillips 66 ). I think I might have looked at this before in the Chart Of The Day but perhaps not. This has been one, certainly, that we’ve been following, in the premium membership, we’ve been following this, actually, I’ll tell you exactly since what time, since right there, we’ve been long this stock; nice little move, I think, but don’t give me all the credit, you can give me credit for crafting this strategy though. This is perfect confirmation to my IPO strategy and here’s what that is, you don’t ever buy an IPO on the opening day, read Facebook ( $FB Facebook Inc ). So what we do is, and I’ll come back to Facebook ( $FB Facebook Inc ) in just a second. What we do is, we look and see where the stock traded to begin with, the opening was $34.90, and by the way this was actually a spin-off or a special stock dividend, whatever, to the folks who owned ConocoPhillips ( $COP ConocoPhillips ). So the genesis of the trade or the stock is a little bit different but the principles are still the same, so we can use this. The high was $34.90, then what we do is, we draw a line right across there, all this stuff in here, guess what’s happening? Some people are winning, some people are losing, some people are buying, and some people are selling, because that’s what makes a stock go up and down. But after this magical moment in time, right here, everybody’s a winner, everybody who bought in this box, every single person is a winner, even those that bought right at the very high here and they’re are in pain but they’ve held back, you know, held it for another 10 percent or whatever this pullback was; even those who bought on the first day because they saw that spin-off, they didn’t own ConocoPhillips ( $COP ConocoPhillips ), but by golly they sure wanted to own a refinery. Why? I don’t know but that’s just the way it is. Every single person’s a winner. So now going forward, and you know, we had a little dip here, okay, that’s called the up-and-down movement of stocks, but going forward, everybody’s a winner, they’re all losers here, everybody’s a winner, and what I mean by that is, once we start getting into the green zone here, there’s no selling pressure, there’s no selling pressure that comes from the folks in this box, they’re all winners. Now there may be profit taking pressure, but we don’t have any of those dynamics where a stock, you know, support once broken becomes resistance when a stock returns to test that level. Why is that? Well, it’s because those folks who bought anticipating that the stock would hold are now in pain that the support has broke down, and so if they can just get their money back, then they will be more than happy too, and so they’ll go ahead and sell, hence, the support level, at which they bought, after it’s been broken, that’s the level that they’re going to sell. And then there’s one other thing, and this is really, really important. What about those folks who didn’t buy, who aren’t in pain, who have nothing to do with it? Well they’re chart guys, they can see what’s happening, they know this dynamic that I just talked about, but frankly, at this point, because of electronic trading, because everybody’s got a chart that they look at, it’s almost like a self-fulfilling prophecy; the dynamic perpetuates itself exponentially, because now, and I’ll do this, when a stock falls back to support, I’m going to buy it. When a stock breaks down below support and then rallies back up to support, to prior support, I’m going to short it. You know why? Because the strategy works and sometimes it’s not any more difficult than that. So why does this IPO strategy work? Again, when we get a break out here, that’s your trigger to be buying, once you buy you trade it like any ordinary stock that does what? That keeps hitting all time highs; isn’t it nice to be in a stock that’s printing all-time highs, printed another one just today? Isn’t it nice to be in a stock that took a little over a month to form a base here, to just kind of base out, rest and then break out again? So this is a strategy that works. Phillips 66 ( $PSX Phillips 66 ) is living that dream right now. So what do you do? Well, I would continue to buy it because the strategy is still working. Now, we’re just looking at the 50-day moving average, so would I buy right now? No, because if I buy right now then what I’m declaring is that the stock will never enter this box at all, somehow magically, it’s going to go right up and never come back and fill that box. I don’t think so. I think it’s going to do something like this, ultimately, and then move up, so you wait for the pullback and then you buy it and you enjoy the ride. That’s it, members get over to the Strategy Session we’ve got a lot to cover and also if you haven’t checked out Option Market Mentor please do so; we’ve got some good trades going on over there, there’s some great folks in the forum, though from what I hear, some of you are a little snappy, okay? So let’s not be snappy, let’s be nice to each other, it’s a different place over there, if you want to be jerks go to the Yahoo message boards there’s a whole boatload of them there. Anyway, that’s a good resource for you, and we’re also putting more and more educational things on all the time, so I hope you’ll check that out. Okay, have a good evening. Free Chart