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IPO Trading Review for the Week of October 25, 2021 – October 29, 2021

November 1st, 2021

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Catch me on Benzinga Pro at 12:00 PM EST to review last week’s winning IPO trades and a preview of the upcoming IPOs for next week:

https://www.youtube.com/watch?v=IOL7mhfb5Eo

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Last week we saw a hot market across the NASDAQ and NYSE that surprisingly showed a cold shoulder to fresh IPOs, with LIAN, ENSB, and CDLA all pulling their IPOs from the calendar, and others pricing modestly and offering attractive debut prices for IPO traders. In this kind of market, the downside risk is further limited, and buying the dip off the debut provides even more attractive upside potentials. You might miss out on a runner or two, but you’ll protect against the downside as well, which makes for calm, easy trades.

Let’s jump in:

Arteris (AIP) performed as expected, but took a little while to get going, with a debut at $16.51, it dropped out of the gate, and like most IPO day traders, I was able to undercut the debut for an entry that provided a comfortable ride through the first few hours in which AIP struggled to establish its base. Once it consolidated in the $16.00-16.25 range, it began the inevitable upsurge that we tend to see in low-float plays that eventually catch on, and it ran up to $19.75 at the turn of Power Hour before receding back down to close Day 1 at $18.20. Day 2 offered a return to the $19.40 range, but the real move was on Day 3, when it ran up as high as $23.97. This one reminds me a bit of SKYT: which was another chip-related play that took a few days to go up, and a few weeks to really break out. If this follows the same trend, we may get another opportunity to buy AIP under $20 in the next week or so, followed by a run up as high as $30.

Rent the Runway (RENT) was the non-event that we expected, though even this bombshell gave debut and debut-dip buyers a relatively safe setup, as it opened trading at $23.00 and briefly dropped down to $22.00 for a few minutes before steadily climbing for about 10 minutes to a top of $24.75. So if you set a trailing stop loss above your entry , once it broke $23.50, $24.00, $24.50… you took a small win. If you held on hoping for a late day run, you got burned, as it dropped as low as $19.00 towards the end of the day, and things only got worse later in the week: RENT closed on Friday at $17.01… not a position in which anyone wants to be stuck.

Informatica (INFA) debuted below the IPO price of $29.00: opening trading at $27.58, which made for a relatively safe and easy entry with reasonable expectations that it would at least climb back to the IPO target. Not only did it break $29, but it managed to climb up as high as $30.28. Nothing too exciting, but a good example of how the debut setup can provide a debut scalp with limited downside, and an easy exit target at the IPO price or slightly above.

Solo Brands (DTC) debuted at a hefty premium from its IPO price, and in this market, that was not a welcome introduction: as it opened trading at $22.35 off an IPO price of $17.00. Turns out retail traders who liked this one all bought right at the beginning, because from there the stock pretty much went into free fall with mo real opportunity to double up and catch a rebound. It touched as low as $17.00 on Day 1, and though it slightly recovered to as high as $19.33 on Day 2, if you bought this one on Day 1 at the debut, you’re sitting in a rut that might not be reversed for a while. I’m gonna be pretty coolish on any direct-to-consumer plays for the time being, as we just haven’t seen very warm welcomes to plays such as WRBY and HNST (though WRBY has recovered from its initial IPO drop off).

Fluence Energy (FLNC) If you entered this IPO debut with an undercut of the indication price, you set yourself up for a relatively easy win, as it debuted $33.50 and dropped down to a low of $32.00 in the opening 30 minutes. It then recovered rather nicely, giving even debut buyers a break as it steadily climbed up to a high of $35.94 before the close of Day 1. Day 2 saw slightly higher peaks at $36.63, with volatility in the $34.50 to $36.50 range. If you bought the dip below $33, selling at or above $35 would be an ideal exit. Unless I’m extremely bullish on a trade, a $2 win target is pretty standard.

Global Foundries (GFS) when the most publicized IPO of the week debuts at or below the IPO price, with a heavy sell-side imbalance before going into the debut, it’s a pretty safe bet to undercut the debut and expect a rebound back up. We see this especially true for high float IPOs. GFS performed as expected, with a debut at $47 that immediately dropped down to a low of $44.51. A laddered entry below the debut price would have been an ideal method for establishing a price basis that provided a quick positive return once the stock found it’s bottom. From $44.51, GFS quickly rebounded up to $48.00 – providing the first profit taking point, even for initial debut buyers. It then dropped again down below the $45 level, which provided another entry point for day traders who read the bottom and understood that this would be a resilient play. It managed to climb back up above $46 going into Power Hour, but again fell off sharply to a low of $44.48. At this point I couldn’t hold out any longer, and bought back in, as either an end of day run or Day 2 run seemed inevitable. My only mistake was cashing out early on the EOD run, as it closed Day 1 at $46.46 but then got a nod from Jim Cramer on Friday morning, which sent the stock climbing up a Day 2 close of $48.74, and an after hours run that culminated in a top at $53.20. I suspect this one has further to run in the upcoming week.

Udemy (UDMY) offered a gift in the form of a debut a full $2 below the IPO price, and further low-ball entry opportunities down as far as $26.01 before it righted ship and baselined just above $27 for most of the day. No big run yet, but it did peak at $27.75 in after market trading, and we have yet to see what kind of Day 2 activity it will see. Ed-tech firms like DUOL and COUR took a few days to run, and while the IPO market was cool this week, the overall market is hot, so we may see this one climb a bit further once retail traders recognize the opportunity.

HireRight Holdings (HRT) was nothing to get excited about, and not really worth the effort of trading it given the other plays in IPO Land this week. If you did end up playing it, hopefully you undercut the debut price and avoided getting in at the $18.01 debut, as it immediately crashed down to $17.51 at what initially appeared to be a bottom. Unfortunately, from there it found a further base at $17.25. If you doubled up and brought your cost basis down to $17.30-17.40, you put yourself in a position to take a small win or at least a non-loss when it climbed back to as high as $17.75, but if you didn’t take that opportunity to pull the rip cord, you fell further down to a bottom of $17.11
Altogether, not a disastrous position to be down less than a $1 form the debut, but a lot of time and energy would have been required to turn this play into a winner, and not much apparent upside either, which is why this was a non-starter for me to begin with.

Airsculpt Technologies (AIRS) here’s where undercutting the debut ended up biting you in the ass: on the surface, AIRS looked pretty weak when it cut it’s flow by 10% and dramatically reduced its IPO price. But this was all the more enticing to IPO day traders, and from it’s debut price at $12.84 it ripped through two upward halts to a peak of $18.04 which would prove the be the high of the day. The smart move on this setup is to sell a piece of your position out of each halt, in which case you banked exits at $14.00 and $15.63 on those portions of your trade. If you managed to time the peak at $18.00 that’s a pretty bold move, though holding a portion for a longer climb would have also offered a peak at $17.50 at around 2:00 PM EST, and you ultimately had all day to sell above $15.00, so if you bought the debut, you made money on this trade.

Marpai (MRAI) continued the trend of low-float IPOs that have been relatively safe trades. Day traders have keyed in on these, and tend to move in later in Day 1 or in the following days, so buying a position on the debut or opening dip has proven a winning strategy for patient traders willing to wait for the runup. It also helps if you’re trading on a platform that has early pre-market hours. MRAI debuted at $4.38, and for the first 30 minutes of trading, moved downwards to a bottom of $3.80. I was in no rush to buy the debut, and figured I’d take a play if it dipped below $4.00. Got a small fill, and decided to ride it up to $5.00 for an easy 20% win. However, if you held it overnight and sold in the early pre-market hours on Day 2, you could have taken as much as $7.11 on the trade, though it also traded as high as $6.31 on Day 3 in regular market trading. The lesson here, is that ultra-low float is hot right now (we’ll keep this in mind as we move into next week’s trades).

Biofrontera (BFRI) another low floater, an uplisting, but still, worth riding the trend when it’s hot. Debuted at $4.09, quick dip to $3.90, then a two minute climb to $4.70. The Level 2 data clearly showed a huge sell was at $4.70, so my exit was at $4.65. Not a huge win, but not much time spent cashing out, so happy to get in/out for a profit. It was a pretty painless trade regardless of your entry, as it stabilized in the $4.30 to $4.50 range, despite a drop off at the 2:00 EST mark down to $4.00 again, it rebounded sharply going into the close at $4.41. Maybe this gets picked up by day traders next week, but it’s an uplisting, so not gonna get too excited about it. Just worth playing these low floaters for now and some will run, others like this one appear to have low downside risk anyway.

Sonendo (SONX) not low enough of a float to become a day trading target, this biotech debuted at $9.02, climbed up to $10.00 and kind of swung between those marks for the rest of the day. I don’t care too much for this kind of setup, so not gonna discuss it too much beyond that.

Entrada Therapeutics (TRDA) is the kind of biotech debut that gives me nightmares, and provided a clear example as to why I avoid these… debuted at $26.50, briefly climbed to a peak of $28.89 in the second minute, but jumped off a cliff from there, finding it’s first bottom at $23.11 and then after baselining at $23, fell further to $22.20 at the turn of Power Hour before climbing back as high as $26.00 before closing on an plunge from $26.00 to $23.95 in the final minute.

Aura Biosciences (AURA) is the kind of biotech debut that keeps the dangerous FOMO alive and occasionally temps me into misguided biotech IPOs, with a debut at $14.10, and after essentially base-lining at $14.00 for the opening hour and a half, embarked on a steady climb into the $15.50 range until it pushed into an EOD frenzied run up to a high of $18.37. I can’t imagine having the patience to hold this one all the way through to the peak anyway, and trading this wasn’t even a consideration for me, but it does show that there are opportunities in biotech… just enough to sometimes get me to break my own rules (just long enough to be reminded why these are generally to be avoided).

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Reminder: I’ll be on Benzinga Pro at 12:00 PM EST to review last week’s winning IPO trades and a preview of the upcoming IPOs for next week:

https://www.youtube.com/watch?v=IOL7mhfb5Eo

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Oh, and if I helped you take profits on IPO trades this past week, or if you just feel like supporting me for the time and effort I put into this research, please consider making a donation to my whiskey fund:

https://www.buymeacoffee.com/hammondish

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. Trading equities is risky. Do your own research,and trade your own trade.

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