7 Things To Know About Trading IPO's

Individual investors and traders are not the most important investors for a new IPO. Wealthy individuals are not the most important investors, nor are professional traders. The Market Participant that truly matters in terms of the success of an IPO are the giant and large Buy Side Institutions.

2. To follow the giant Buy Side institutions and to discover which IPO’s they are buying and which they are not, is a simple matter of having the correct accumulation/distribution indicators. These indicators were written for our modern markets, whereas older indicators such as MACD and Stochastics do not reveal this vital piece of information.


3. The Institutional Percentage Ownership is important. Facebook had less than 2% institutional ownership in the first several months after it IPO’d, because the Giant funds shunned FB immediately and the collapse of the stock was due mostly to their lack of interest. A good IPO will have anywhere from 40-90% institutional ownership. This is because most small lot investors and small funds are afraid of investing in an IPO. They do not know what information is needed in order to make a proper assessment of a young firm, and they listen to gurus and recommendation services that are only trying to dump a lot of IPO stock quickly.

4. Revenues and Income matter but a company can have a strong IPO even if it is not making a profit yet, IF it is showing that it can make a profit within a quarter or couple of quarters. Giant Buy Side Institutions are long term investors and they will buy into a young firm ahead of strong earnings reports. They can tell when a company has what it takes to succeed.


5. Platform candlestick patterns: Quiet accumulation is a very distinct pattern on charts. Candlesticks stocks ticker sentiment in a blocky tight formation with consistent highs and lows. This is due to the specialized order the giant Pension and Mutual Funds that are the Buy Side Institutions, use regularly in Dark Pools. This specialized bracketed order is what keeps price in a Platform sideways pattern. This is a newer sideways pattern that first started showing up in charts less than a decade ago. It is a vital piece of chart analysis for individual investors and traders because it shows that quiet accumulation is occurring. Giant Buy Side Institutions keep their investments very private, and do not reveal their holdings until they are required to do so quarterly. Only on stock charts can you quickly see what they are buying ahead of the quarterly reports.

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