IPO Trading Review for the Week of November 1, 2021 – November 5, 2021

November 7th, 2021


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Ok, so in the interest of full-disclosure, last week I took a brutal loss… Sometimes you nail the call, line up the perfect strategy, and then fumble the execution of the trade… that was the main story of my IPO trade last week, and I’ll get to it in a bit. But the main point I wanted to make is that traders need rules, these rules should be simple and are meant to keep you from repeating bad habits. I have two, and I broke one and paid dearly for my mistake. It happens, we learn from our mistakes, and move on, but I wanted to rehash them for you in hopes of helping you avoid such a critical mistake:

Rule #1: Take Profits without Regret: The key point of this rule is to focus on taking profits at any point in the trade when profits are on the table, and if you stick to your strategy, do not regret missing out on further gains if you sold too early, or held on past the peak but still took profits without turning a win into a loss. The danger in regretting that you “could have made more” on a winning trade, is that you are adopting the mindset that your strategy was flawed, despite being successful. Whether you’re riding a trailing stop loss, setting a limit order at a target price, or executing a market order when you see volume drop, it is very difficult to time the very top of a volatile stock, and the downward pullback from the absolute peak is almost always a violent downward drop. It’s a bit like running up a hill with a blindfold on, and trying to decide when to stop and take the blindfold off… except at the very peak is a cliff. Better to stop partway up the mountain than fall off the other side.

Rule #2: Don’t Chase: This one makes my short list of Rules (I only really have 2), because it has burned me every time I’ve broken it, and yet I still make the mistake from time to time, as I did this week. The results were as disastrous as expected. This primarily applies to chasing halts, but really goes for any stock that has moved aggressively upwards. In IPO trading, this specifically applies to the debut. If I am highly confident that a stock will go up, I want to buy the debut price… and if I think it will go up but might have a soft opening, I may buy into the open with a bid below the debut price (undercut) or a ladder of bids at and below the debut to catch a short drop before an anticipated run up. but NEVER should I buy AFTER the stock has gone up, and here’s why:
Consider that in more IPO plays, I’m aiming for a 10-15% win on a play that often maxes out at 20-30% in optimal conditions: that means if you bought the debut and timed the peak perfectly, you’d get 20-30% gains. In reality, timing the top perfectly is pretty tough, so I generally expect to miss the top by anywhere from 5-10% and possibly more if it really takes off. So if I miss the debut, and buy in at a point that is already gone up 5-10%, then I’m leaving myself very little room for my target profit zone, and end up mentally adjusting upwards, which puts me in the mindset that I’ll have to shoot for an even higher price target to get my desired gains. In the case of a stock that halts up out of the gate, you’re already giving up 10% right on the halt itself, plus another 5% or so at the opening price out of the halt… already losing out on 15% and entering at a point where you should be considering exiting at least part of your position is not a winning strategy over the long term, and more often than not, you’re setting yourself up to buy the peak in a position that is well over the debut price, and very likely to reverse dramatically. Anyway, I’m still licking my wounds from last week’s debacle: it was bad enough that I simply missed the entry on a high conviction win opportunity, but to then turn it into a massive loss by breaking one of my only rules, is just stupid.

Ok, so let’s take a look at last week’s winning IPO trades:

LianBio (LIAN) made a rare Monday debut, and promptly fell off from an opening price of $15.5 down to initial resistance around $14.50, but it wasn’t done dropping yet, and pretty much descended a staircase of successive drops into a Day 1 close at $13.70. Day 2 was no relief, as it traded sideways for most of the day, and Day 3 it continued its downward climb to a bottom just under $13.00. If you identified that as the bottom, you were right… and it did manage to climb its way back to close the week at $14.41. Perhaps news of the Pfizer COVID pill provided some catalyst, and if their partnership with Pfizer opens the door for them to bring this treatment to the Chinese market, it could be a strong long term hold.

Allbirds (BIRD) showed that being a well loved brand in an affluent market segment can translate into a frenzy of IPO retail buyers, as it debuted at $21.20 and steadily climbed to a peak of $32.44 with no retracement below $23 during that run… meaning you could have quite comfortably bought the debut, set a stop loss at $23 once it passed $24, and let it ride. If you raised the stop loss to $25 on its initial breakout to $26, you would have taken profits there, but if you gave it some room to run, you would have had a pretty easy trip to a possible exit target at $30, or trailing stop out slightly higher. I sat this one out for personal reasons, but it’s a good example of the power of having a loyal, wealthy fan base (Allbirds are apparently super popular amongst the tech elite).

Claros Mortgage Trust (CMTG) debuted at $16.14 … significantly below the IPO price of $18.65, and quickly rose to fill some of the gap off the debut, with a Day 1 peak of $17.13. Not all that exciting of a play, and not in my gameplan for the week, but another good example of how a sub-IPO price debut can setup a winning trade with relatively minimal downside risk.

Delimobil (DMOB)
Got pulled.

NerdWallet (NRDS) I had initially intended to skip this one, but when I saw all the posts with the $NRDS symbol and Revenge of the Nerds memes, I realized that the meme trend was going to be in full-effect on this one. As the ipre-debut indication price climbed upwards the $23 level, it was clear that demand had showed up for this IPO, and I decided to give it a shot with a half position, and glad I did. NRDS debuted at $23.50 and quickly spiked up into a halt at $26.68. It resumed out of the halt at $28.67 and made further moves into another halt that formed the peak at $34.44. At that point, you should be taking profits out of the second halt, and if you did, you absolutely nailed this trade for a robust $10/share win. Nice job. If you held through that, you were ok still, but might want to consider taking some profits at each halt in the future. After the first halt, I eyed $30 as my target exit, and set a limit order at $29.85 and was happy to bank profits at that point, although holding for further gains could have yielded substantially greater returns (Rule #1: Take Profits without Regret).

Evotec (EVO) didn’t play much like an IPO, as it was previously trading… not quite clear what the deal was on this one, so I passed on it. Looks like it debuted at $20.90, and slowly, and steadily climbed to a high of the day at $22.63. Would have been pretty tedious to watch, but if you saw the opportunity, good job. But if you missed other opportunities to play this one, you might feel like the opportunity cost was pretty high: in this case, just apply Rule #1 and be happy with a win.

Arhaus (ARHS) priced their IPO below range at $13, and still failed to provide a debut premium, as it opened trading at $12.50. This provided an opportunity to buy at a perceived discount, and traders who took this play were given a quick spike up to $14.00 before a consolidation at $13… but from there, the bottom fell out, and a low was established at $12.05 before a slight rebound to $13 failed to breakout, and it traded the remainder of the day in the $12-13 range. So altogether, a relatively safe trade with little downside risk yet little upside gains.

Cadre (CDRE) debuted at $15.07 and didn’t move nearly as much as one might have thought given the focus on low-float IPOs and applicable focus on police and first responder equipment given COVID and general social unrest. In two days of trading, the ATH stands at $15.70, with an ATL at $14.87. A safe trade if you took it, but low volume and basically no volatility made it a wise pass.

MDxHealth (MDXH) debuted at $12.15 and made a sharp spike up to $13.17 which instantly reversed into a long consolidation at $12.00 for pretty much the entire remainder of the day. Basically no movement throughout the week, as it closed Friday at $12.00 even.

Desert Peak Minerals (DPM) Got pulled/rescheduled.

Cian (CIAN) debuted at $17.47 and followed an immediate drop to $17.00 with a reversal spike up to $18.07 which was quickly given back to consolidate at the debut price, before falling down to a low baseline around $17.00 for mos tof the afternoon. It managed to rally back up to a high of $17.87 leading up to Power Hour, and held on to that level into a close of $17.67. Nothing too exciting here. A decent example of retail trader’s focus on domestic companies that carry strong brand name recognition in the retain market.

Nuvectis Pharma (NVCT) Also pulled/rescheduled.

The Real Good Food Company (RGF) didn’t do much either, with a debut at $11.66, a quick spike to $12.75, and then a staircase decline down to $11.00, retracement to VWAP at $11.60 and trail off at the end of the day to close at $11.00 even. Again, basically no social buzz on this one, and not much volume after the opening 5 minutes, so not much volatility or opportunity for a win.

FlexEnergy Green Solutions (FLXE) Pulled/rescheduled.

Mainz Biomed (MYNZ) Ok, so this was the main focus of the week for me, and for reasons I can’t fully explain other than having some personal distractions that likely contributed to being unfocused at the time of the debut, I missed the open. It debuted at a hefty premium of $14.35, and immediately spiked up into a halt at $15.79. The game plan had to been to buy in on the debut and sell out of the first halt. Having missed the entry, I broke my cardinal rule, and chased. You can guess how that worked out (hint: not good at all). For those who sold out of the halt, the exit was at $16.58, for a $2.23/share win. Good for you. You banked a solid win on a quick trade and took an early Friday off into what I hope was a wonderful weekend. For the rest of us: those who chased the initial halt, or failed to exit out of the first halt, the remainder of the day was a painful exercise in why you don’t chase halts. The move down out of the first halt initially gave a brief moment of hope, as it quickly made it to $18, but the reversal was sharp and swift into a downward halt, that then opened up down at $11.47. the resulting consolidation offered an opportunity to load up shares as low as $10.17 for a potential rebound, but the rebound back to VWAP was cut short by a halt at $12.59, and the open at $12.50 ran up to touch $13.45 as the high point for the rest of the day. I had set a trailing stop loss at $12.00, and had trailed it up going into the halt, but rather than taking the graceful exit at $13 for what would have been a minimal loss, I got visions of a comeback victory that never materialized, and like many, was forced to exit most of my position at much more painful levels later in the day as it bottomed at $8.25 before a quick recovery halt into the close. I managed to exit some of my position at the somewhat merciful $10.00 level in the opening minute of after hours trading, and still hold a small position on the hope and prayer that something magical comes along this week and helps recover some of this loss, but given the difference between what I would have pulled had I not missed the entry, and the loss I incurred instead, I will have to post this one in the mental hall of shame as my worst IPO trade ever… but will gather the lessons from this trade for further strength in battle, and am ready to move onto next week’s trades.

Oh Wait… there’s one more point I almost forgot to make:
For those of you who missed it, I posted
a deep dive into this one on September 30, 2021
At the time I wrote the original piece, PETZ was trading around $1.40
Last week on 11/03 it ran to a high of $8.13 in late after hours, and has made runs to $5.48 and $4.25 since then, and closed the week at $3.88
I’m not sure if we’re gonna see a massive spike on this one as I had originally hoped (I know, my expectations may have been a bit grandiose), but I’m not convinced that we’ve seen the main event on this one quite yet, so stay tuned. And if you did bank profits on this one already, congratulations: you likely pulled at least 100% and likely much more.


Remember to please join me on Benzinga Pro at 12:00 PM Noon EST on Monday, November 8, 2021 to review next week’s IPO calendar:

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NOTE: this is not financial advice, and I am not a financial advisor: this information is just my opinion and is for informational purposes only. I may have or take positions in the equities mentioned in this article in the next 72 hours. Trading equities is risky. Do your own research,and trade your own trade.

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