All About IPO Bases

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Setup

IPO in not only about buying the high of the listing week. It is an extremely poor interpretation of the work. A strategy is not only limited to a setup, what makes it effective is when you manage it according to its nature & potential.

Conducting a study on how we would have done if we had bought every valid #IPOBase breakout since 2017. This will help us in finding the success rate of IPO bases and also in identification of the characteristics of a high-probability setup. While I wish to publish the complete study & the results on completion, as it includes too many stocks and multiple charts of each setup, it will become too much complicated to publish on Twitter.

Hence I will share some #CaseStudies here which I hope will be beneficial not only in understanding IPO bases but also in trade management, scaling in & out, identification of warning signs, and selling into weakness. To achieve consistent success in trading, we need to reduce subjectivity in trading though we can't eliminate it. So, am following

<aside> 💡 Some basic rules throughout this study- Setup Rules

  1. Sign of demand for the IPO- should list at premium. Will prefer if we have a few days of buying post listing.

  2. Should form left side high of the base within first 5 weeks of trading.

  3. Depth - preferably 20% to 30% .

  4. Duration - 2 to 5 weeks (if we are seeing some supportive action within 5 weeks of basing we can make an exception)

  5. Breakout on heavy volume.

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<aside> 💡 Trade Management Rules-

  1. Standard entry will be at the breakout of the left side high of the base into new high ground. 2) Will take cheat entries if available to pre-empt the trade & manage the risk at standard breakout level.

  2. Will hold for 8 weeks without unnecessary interruption if the stock sustains above our pivot for 3 weeks post-breakout. Will exit if initial SL is taken out.

  3. Will average up if the stock gives us any valid entry such as any standard base, 3-week tight closings, shakeouts, continuation cheat areas with pocket pivots etc.

  4. Will scale out if stock is exhibits severe warning signs & signs of weakness. Here, I will exit the

averaged-up quantity only while keeping the initial quantity intact for a decisive exit signal. (O'Neil's rule)

  1. As IPO bases have huge potential, we will take only decisive exits by selling into weakness - a decisive break below 50 days EMA will be the ultimate exit signal

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