IPO Lesson, 5/19/2011
Pacific Time Zone10:13:08 MKing
You can’t get allocation for shares at the IPO price unless you are a very large client for a large brokerage firm that is part of the underwriting team. And even then, it’s only a dog bone they throw you, real low number of shares
actually, my recommendation to 99% of traders is forget trading IPO's. Hot IPO's are almost nonexistent so you are only getting practice on about 1 every 12-18 months. It’s better if you just watch and learn, maybe smile at them once in a while. I can’t remember the last hot IPO? Anyone remember one? But from 1996 to 1999, hot hot hot IPO market and that’s where I learned how to trade them
yeah Facebook is going to be different candles, won’t have that extreme range like we saw in LNKD because there will be too many institutions involved with that stock.
so the LNKD pattern is a common chart pattern. Now, there are other stocks going public soon, other social network stocks, maybe Twitter I think is too. Not sure about Facebook
since there are no indicators yet [because not enough history -- it is new stock], you need to watch the trading action, which is difficult for a new trader to understand.
so what you want to do is let these hot IPO's peak and then look for a big drop, big multi point drop.
IPOd at $45, opened at $80, went to $92.99 and I was not willing to try BUYing early because the risk is too high. Remember there are a bunch of people who want to SELL today.... original investors, venture capitalists who lent the money, banking syndicate, insiders, mutual and hedge funds who got allocation of LNKD stock
we don't have hardly any hot IPOs like LNKD but it’s been talked about a lot. When you see an IPO discussed as much as this, all the hype, then it will likely trade very actively unless it is a really negative market, like Fall of 2008 would be bad for IPOs
this is probably not too useful information on an IPO because it rarely happens
ok, now that we have a little break at the moment, I can explain how you handle a hot IPO