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IPO Trading Review for the Week of March 28, 2022 – April 1, 2022

April 3, 2022

The market appears to have stabilized a bit after a mostly depressing initial 3 months of the year, and as expected, we finally saw some life in IPO debuts. Though we still haven’t seen a mainstream IPO debut since CRDO in late January, we have seen a rush of the low-float variety over the past couple of weeks, and those that have debuted have been fairly predictable.

Up until this past week, the play on these low-float IPOs was to wait for an initial drop, and then accumulate shares on further drops throughout the day: KSCP, MTEK, HTCR, AKAN, and LCFY all more or less followed this script. But as I mentioned at the start of last week in the IPO Preview newsletter, day traders were likely to start piling into the Day 1 play – and this seems to have washed out the Day 2 rally play to some extent. But this also indicated the potential for a strong debut for a well-positioned IPO that could run, and we were able to confidently predict a breakout play on which I hope you were all able to take profits.

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Catch me live on Monday at 12:00 PM EST (noon) on Benzinga Live to review last week’s winning IPO trade and preview the IPO Calendar for the week ahead:

https://www.youtube.com/watch?v=MgeAV3AiX2E


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Ok, Let’s take a look at what happened last week in IPO Land:

Rail Vision (RVSN) – March 31, 2022 | 1.97M Shares
IPO Price: $4.13
Debut Price: $3.14
Day 1 High: $3.15
Day 1 Low: $2.45
High Since Debut: $3.09
Low Since Debut: $2.45

Day 1 Action: This one opened with a predictable drop from $3.14 down to as low as $2.63 in the opening minutes, but didn’t fall as dramatically as some of the other recent low-float IPOs: indicating that traders were eager to establish positions early, but not in a rush to do more than accumulate. A slight run back to VWAP at the $2.84 mark failed to breakout, and the price subsequently dropped out to a low at $2.45. At this point, accumulation bids started showing up, and the price stabilized in the $2.50 to $2.70 range: not the kind of weakness we’d seen in previous Day 1 disasters that then ran on Day 2. At around 2:00 PM EST, we saw a marked rally that nearly touched $3.00, but was sold off at $2.98. The pull-back was not all that dramatic, as the stock found buyer support at the $2.65 level, and made another run at the turn of power hour back up to $2.97. This run again was capped before hitting the $3 mark, and once again, the price fell as far as $2.65 before regaining strength into the closing bell to get back to $3.09.
At this point, I had seen enough to recognize that we had not seen the same script that had led to Day 2 runners in many of the previous debuts, and decided to take profits in the early minutes of after-hour trading. I try to stick to a trading strategy, and am happy to exit with a win if I don’t see the ideal setup I had been looking for when I entered the trade.

Day 2 Action: Due to an overabundance of Day 1 buyers, along with a float that appears to have ballooned to 18.66M shares from the debut offering of just 1.97M shares, there was no Day 2 pop on this one. Even the early minutes of pre-market didn’t provide much of a spike (just $3.15), and then things faded out from there. RVSN opened at $2.61 and couldn’t get higher than $2.75 until the very end of the day, and not before visiting $2.45 again on about half the volume of Day 1.

Looking Ahead: I’m not thoroughly convinced that we’ve seen the end of this one’s opening runs: should the number of actively traded shares be obscured by the total free float, the price could still get pumped. But otherwise, this stock is likely to be relegated to the LPX bin for a few weeks (or months), until insider lockups expire and the price could then get pumped to new highs. I’ll be putting this one on the back-burner until it drops below $2, and then may pick off some lots on any dips or knifes down at that point. My hypothesis on these is that they execute their IPOs with an ace up their sleeves in terms of a headline they know the can drop a month or so down the line when they want to run the share price so insiders can sell out at a premium. There are plenty of potential catalysts for this pre-revenue company: any contract with a major railway or manufacturer would be enough to run the share price, though it already doesn’t really have the ultra-low float profile I would ideally like to see for this kind of setup.

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Expion360 (XPON) – April 1, 2022 | 2.145M Shares
IPO Price: $7.00
Debut Price: $7.90
Day 1 High: $11.29
Day 1 Low: $7.26
High Since Debut: $11.29
Low Since Debut: $7.26

Day 1 Action: We finally got a debut runner in XPON, with a debut at $7.90 that took a few minutes to get going – in fairness, it did dip as low as $7.29 in the opening minutes, but not far enough to have instill panic in any debut buyers nor trigger any 10% stop lossesl off the open. From there it began a steady march through a halt up at $8.48 that opened at $8.80, sustained a halt down from $8.28 that opened at $8.23, followed by a steady rise up to a high for the day at $11.29. After that, it lost momentum, and trailed out to a mid-day baseline at $7.60 that attempted but failed to rally into power hour: reaching $8.38 before falling again to $7.47 and regaining a bit of composure to come fill-circle and close at $7.93 (just $0.03 above the debut price).

Day 2 Action: This was a Friday debut, so we’ll see what happens on Monday.

Looking Ahead: We often see two spikes in the first two days, and we already saw one spike off the debut rally, so this one seems like it could make a run on Day 2 at some point. I expect we see a spike on the 4:00 – 4:05 AM EST candles, but where it goes from there will determine my strategy for trading this for a possible Day 2 play on Monday. If there’s a 4:00 AM spike that slowly trails off – as opposed to immediately reverting to the $7.50 – $8.00 range, then I would expect an opening dip with a rally at some point in the morning during regular trading hours. If the early AM spike pretty much disappates right away, I will be looking for any kind of upward movement to indicate a pre-market run to take a trade, but will likely take any profits before the opening bell. It feels like this one got pumped over the weekend, so I’ll be watching for an opportunity to buy in under $8.00 for an expected pop. Not something I’ll hold long term, but there are a lot of eyeballs watching this one, and it feels like Day 1 may have just been a preview of further action to the upside.

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Uplistings:

Iveda Solutions (IVDA) – April 1, 2022 : This one reminded me to never buy an uplisting: either as a secondary offering on WeBull nor as an OTC going into the uplisting. Having traded around the $1 for much of the week, IVDA shares dropped to around $0.60 on Thursday before the 8:1 reverse split and subsequent pricing well below the indicated $9.68 at just $4.25… oof.
As I’ve seen countless times before, the wheels fell off this one from the start, opening at just $3.38 and falling as low as $2.88 before a strong rally into the close at $3.77 and a peak at $4.00 in after hours. Having played many of these uplistings off the opening dip, was reminded that it is never a good idea to get involved in these until AFTER they drop hard off the uplisting: as catching the reversal has been a solid move. Further, many of these have made strong moves on Day 2, so hopefully there will be some upside action on this on Day 2 so I can minimize my losses (wasn’t a big position anyway, but still a good reminder to stick to the proven strategy for any setup).

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