How To Trade IPO Stocks: Look Past The Hype

TL;DR

To increase the likelihood of a winning trade, investors should wait for IPO stocks to break out of an IPO base before buying, as demonstrated by the success of Beyond Meat's IPO base.

Transcript

if you're trying to find socks that are in their early stages of growth IPOs are of course a great place to start with peloton lyft uber beyond meat and many other high profile IPOs hitting the market this year there's heightened investor interest in new issues but amid all the chatter and hype that can come with these high profile IPOs it's import... Read More

Key Insights

• 🥳 Buying IPOs on their first day of trade is risky due to volatility.
• 😉 Waiting for IPO stocks to break out of an IPO base increases the odds of a winning trade.
• 💁 Beyond Meat's success can be attributed to the formation of its IPO base early on.
• ❓ Being tactical when buying and selling IPO stocks is essential for success.
• 👶 IPO ETFs provide a less risky option for gaining exposure to new issues.

Questions & Answers

Q: Why should investors be cautious when buying IPOs on their first day of trade?

IPO stocks tend to be volatile and risky due to their lack of trading track record. Examples like Facebook and Snap show that IPO trades can quickly head south after the first day.

Q: What is an IPO base and why is it important for IPO trades?

An IPO base forms when a new issue consolidates its gains shortly after going public. Waiting for an IPO stock to break out of an IPO base before buying increases the likelihood of a winning trade.

Q: How did Beyond Meat's IPO base contribute to its success?

Beyond Meat formed an IPO base after just four days of trade and broke out above the bi point at 85.55. This consolidation allowed the stock to prove its strength and eventually run up as much as 858% in less than three months.

Q: What factors should investors consider when selling IPO stocks?

Being tactical when selling IPO stocks is equally important. IBD recommends selling once the stock falls 7 to 8% below the entry point or breaks below the 50-day moving average in above-average volume.

Summary & Key Takeaways

• Buying IPOs on their first day of trade can be risky due to volatility and lack of trading track record.

• IPO bases, which form shortly after a new issue goes public, increase the odds of a winning trade.

• Beyond Meat's success can be attributed to its IPO base, leading to a massive run in its stock price.