Recent IPOS.

I love trading in recent IPOs.  Many times these can be very profitable trades for bulls over a couple of months for a couple of reasons.

First,  the floats tend to be small at this stage due to various lockouts, etc. it does not take much to get these moving.

Second, there numerous mutual funds, ETFs, etc... that must buy the new IPO on the open market,  That provides price support.

Third, the quiet period allows news, and analyst targets to stack up and provide a boost when the quiet period ends.

Others' warnings: Without exception, I have never bought an IPO the most were not saying was "overvalued"  Ignore that nonsense,  I want power, I want momentum, I want huge gains.  Overbought gets overboughter on these types of stocks.  Follow price and ignore the rest.

With that being said, let's take a look at the big 3 IPOs that recently began trading.

TWLO: My Favorite and I still continue to hold the position I've acquired in the low 30s.

Trend line is in place,  any bounces off that trend line can, and should be bought.

ACIA:  So much power,  I had a great entry but sold for a $7 gain after on the shadow bar.

LN: This just started trade.  Predictably, it "enjoyed" a second day pull back.  But so did TWLO and ACIA,  in both of those stocks bears were pronouncing them as failures.  

Yet, as with TWLO and ACIA, there were some productive things going on in the shorter term charts.    Notice how LN just went range bound on the hourly.   That tells us the downward momentum is wanning-- i.e. the first day chasers have now exited.    This gives us a lower risk entry. We can risk a small amount-- using hourly lows as our stops and if the trade works, we make 10X R returns.  Yes please!

Also,  many momentum traders will wait until  an IPO  retakes its first day close to enter.  That is a classic setup that many are watching and waiting for.  I  would rather get in before that point, with well defined risk and let those traders push this higher.

So, we'll see how this pans out.

Post Trade Analysis -- SALE

Losses happen, that is a fact a of trading.  

Here's a recent one I had. On this trade I took an .80 loss on SALE, which was about .05% of my equity so good risk management.  Had I just looked at the P&L I would not have realized my mistake. 

 But As I was going through my scans this  jumped out at me as it was a trade  I misanalysed the buy point and should not have taken where I did.  Some times a clean slate brings clarity and I now see my mistake. 

The mistake I made was where I drew my breakout line.  I used the November high, which caused me to buy into an extended stock on the weekly. 

 The correct point at 18.97.  I should have taken this trade  on a break out 19.  Which would have made this trade a decent winner instead of buying it in the  $20.30s which made it a loser.

Watch past power for future gains.

Here's a stock I've got my eye on.  It's not an entry yet, but something definitely worth watching. 

Post Script: This was never in stage 2 and not a good setup:

Creating Momentum Watch lists

One of the things that many new traders struggle with is how to create watch lists.  Many services give stock "picks" but don't tell you how to scan for those stocks or how to create your watch list. 

My approach to trading generally focuses on trading weekly  breakouts.  The reason I like weekly breakout is because the win rates and gains tend to be higher than on shorter time frames. I'll pull back the curtain and show how I do my analysis and stock selection. 

Chasing Power

Eric Muathe's  You Tube Videos are a must see for the traders looking for big moves.

Power Scan.

Powerful stocks have a multi-year breakout on RSI.  Here's the Scan I've been using.

This Scan provides a list of the stocks making a 2 1/2 year high on the RSI.

Fishhook Update

 I've had a lot of questions about how I find big gain stocks and trade them with the Fishhook setup.  This post is a follow up on my initial description of this set up

The Fishhook Setup that I described has been performing extremely well.  It has performed much better than the range expansion breakout that I also trade--which has had limited follow through the past few weeks. 

The Fishhook Set up

Lately, I've noticed that there are a lot of stocks making some big moves.  I've been using a fishhook entry on these stocks with a lot of success.  

Big Gain Hunting: PIP

PIP has the possibility for making a huge move within the next few weeks. It already had an initial EP August 8, 2014 when the Chancery court of Delaware issued a decision finding that PIP was entitled to damages from SIGA:

 "I conclude that PharmAthene has proven adequately that it is entitled to an award of a lump sum as expectation damages for SIGA‟s breach of contract."

Per the decision, the damges will be submitted by PIP's expert and SIGA is only permitted to challege computational errors and not the availability of such damages. 

The interesting thing is that the Court did not actually specify a damage itemization. PIP's attorneys have to supply that.  Undoubtedly there will be a short briefing schedule which could extend the date into next month.  That being said, PIP is likely to obtain a court decision (and investors will get a press release announcing that PIP has been awarded something in excess of $200,000,000.

That is a tremendous amount of money for PIP, which currently has a market cap of only 127 Million and 14 Million in sales.

Will they collect?  First, in hunting this big gain candidate, I'm not sure that it matters, the announcement should spark the move in itself as the initial decision on the merits of the suit did.

Appeal?  Probably.   Issues of credibility are nearly impossible to overturn, so I would say that SIGA would have an uphill battle unless they can overturn the legal theory of the expectation damages.  I don't think that will be the case since it already came down from the Delaware Supreme Court, which agreed that it was a proper measure of damages.

In addition SIGA should have to put up a supersedas bond to avoid collection.

Collectibility? A concern, but as if SIGA attempts a BK, PIP will be the largest creditor it would likely obtain an exclusive license on the drug and the government contracts that go with it. Notably, in the court decision, the court observed:

"SIGA valued ST-246 conservatively at approximately $1 billion. In mid-to-late 2006, as ST-246 began to look “more and more like a multi-billion dollar drug,” SIGA began experiencing “seller‟s remorse,” which was the primary impetus for its bad faith conduct later."

So the question is what effect does $200 + million  award have on a company with a market cap of 127 Million?  I don't see how its a negative.

Big Gain Hunting: JRJC

Despite my intended vigilance on stocks that make mega moves, I missed JRJC's move this week. JRJC enjoyed a relative period of quiet  activity before exploding this past week;

Weekly

So what happened?


News:  partnering with CITIC to launch a Chinese online trading platform.

Ingredient List
Small Float: 21.79 Million shares.
many China stocks making good moves
Growth: First qtr Earnings from june

2014 First Quarter Financial Summary

• Net revenues were $23.2 million, representing a year-over-year increase of 321% from $5.5 million in the first quarter of 2013;
• Gross profit was $17.8 million, representing a year-over-year increase of 389% from $3.6 million in the first quarter of 2013;
• Net loss attributable to China Finance Online was $2.0 million, compared with a net loss of $4.3 million in the first quarter of 2013.

Current market cap 228 Million.

Analysis

JRJC seemed to have the right news at the right time.  This move was not earnings related.  Interestingly,  the market faded  its earnings as the gap was faded:

Everyone would obviously love to capture moves such as this.  I'm not sure that it was justified however, on the news that sparked the run.  I suspect that JRJC will sell off.  If the news of the trading platform is really the game changer that the market's first reaction seemed to think it is, there will be another opportunity to purcahse JRJC when it's earnings start to realize the potential.  This type of event news driven move presents the toughest type of move to capture.  I would be a seller here.

BIG Gain Hunting: CDXS

As pat of my Big Gain Hunting trading plan, I am working on predicting moves based on information currently available.  As I've had a lot of views on my PLUG writeup, I need to disclose that my The S.O.S. Education blog is for theories, analysis, etc. and S.O.S. is  my trading Journal, which documents my actual trades.

I anticipate that there will be some overlap in positions.  In that if I feature a stock here, I may or may not take a position in it.   I have taken a position in CDXS and for that reason my write-up is here on the S.O.S section :

Big Gain Hunting: PLUG review

1000% moves. They happen. Traders catch them. How can I  catch these type of moves? Here's my training plan.

Training Regime 

• Study the past movers
• Place the earnings on the chart. What did monthly, weekly, and daily charts look like. 
• What was the volume the day before, after , the next day.
• What caused the move?  If earnings read the 10Qs 8ks, Conference calls 
• Compare to the past.
• Identify entry cues
• How do the moves start?
• Where are the best entry points.
• Stops
• Predict Next movers
• Write up case for the big moves
• Identify entries exits and plan to handle if rises
• Trading plan to sell if it doesn't work out 
• Start Hunting 
• Start with smaller positions
• I'm assuming I'll have many false positives and will fall prey to my emotions when a trade goes wildly in my favor 
• Assess trade
• Build confidence
• Trade with confidence
• Capture monster move.

Monthly Chart Observation:

• Very long neglect period of small weekly moves with low volume.
• First week of December sticks out like a sore thumb in range.  (December 5-6)

Prior to that time $6 million shares would be a huge day.  But within two days 37Million and they 69 Million shares traded on back-back-back days.

Why?

Plug rose 61 percent to $1.27 at the close in New York, the most since October 2008.

The bloomberg story reported that "The fuel-cell maker that hasn’t had net income since its 1999 initial public offering, rose the most in more than five years after saying it expects to be profitable next year.

What is curious is that there was a lag. November 14, 8k. PLUG noted  

The Company continues to experience a significant increase in its bookings since it announced a $6.5 million strategic funding round from partner Air Liquide in May 2013. Orders have been fueled by the investment news, coupled with an investor update on October 8 ^th . On this call, CEO, Andy Marsh, discussed the Company's plans to expand into providing hydrogen, its growth in European markets, and several multi-site customer deals that were in negotiation.

***

I'm expecting a 'blowout' number of orders in the fourth quarter as we start to close some of these multi-site deals and gain new customer wins. I believe that this momentum will result in the 2014 revenue we need to achieve our EBITDAS break even goal."

Yet on an YOY the earnings were not spectacular.   $4.6 million v 4.8 Million.  down 200k from the prior year and they had shipped fewer units.

So why was the CEO expecting "blowout numbers" and why did YOD eventually shoot up over 100%?

On December 4, 2013 The company issued a PR:

The Company has seen an additional 17.8M USD in bookings. Plug Power is currently in negotiations with large customers on sales agreements to deploy turn-key GenDrive solutions at multiple distribution centers. The Company believes this will significantly impact the fourth quarter bookings, as well as provide a recurring revenue stream from product, service and hydrogen contracts. Plug Power expects orders to range between 30M and 40M USD for the fourth quarter of 2013.

Again, the CEO used the phrase "blowout quarter."  This PR started the frenzy.  

Observation:  The initial move was signaled and you can see in hindsight why this happened.  But if you weren't watching PLUG and reading the 8Ks would have it shown up.  I doubt it.  It went from .55 to 67 cents on double volume.  Which would not have been enough to show up on any scans I currently use. 

On December 4, the Company put some meat behind the numbers 10x the revs from the prior quarter.  PLUG Spiked to a high of $2.24  but then slowly retreated on ever decreasing volume.  A low of 2.2Million shares traded  2 days before the next breakout.  By that time, PLUG had given back 1/2 its move as it settled in at $1.60s

• Observation: Unless traders bought right away on December 4,  most of the breakout buyers were probably sitting on losses or at best had scalped small moves.  

• *Entry: This quiet period would have presented the second entry if the Press Release trade was missed. On a weekly chart this was 2 weeks after initial move.

The next catalyst was Plug issuing a PR stating that they had made their "order target":

"Plug Power has seen significant traction closing out 2013, and we expect the first quarter of 2014 bookings to meet or exceed the fourth quarter of 2013," 

This announcement was good for a move from $1.60s to $4.90 within a week. But by January 27, 2014 plug had traded back down to $2.20.

Then it was revealed that the order came from wal-mart.  Analyst then came out of the woodwork saying they anticipated more orders from other big-box retailers and supermarkets. A frenzy ensued pumping PLUG within just a few days to over $10.00.  But faded quickly on news of a secondary offering

Q1 Earnings The next highlight is  First Quarter earnings in May.  

By this point PLUG had sold off to a low of $3.62 

Highlights of CC 
But again the announcement was very positive:

"Already to date in 2014, Plug Power has over $80M in bookings – double the bookings from 2013. Plug Power attributes this increased growth to the successful launch of its GenKey business. The company expects to ship over 650 GenDrive units in the second quarter."  

Plug has now settled in at $5.65 and gone quiet.

• "Year-to-date, the backlog has increased from 1,439 units to 3,719 units as of mid-April. "

• Plug Power’s full year 2014 booking target is $150 million. This year we have already almost tripled our backlog from 2013 and are more than halfway to our bookings goal for the year. 

• the factory has never been this active.
• Q1 was 165 Units so Q2 should have exponential growth.

Potential downsides:

• Dilution via  secondary offerings.  
• Margins on service business were down. Plug explained that this was to help facilitate the Walmart deal but would be positive by Q4.

 Is there another Run?

I had began this analysis as a mental exercise wanting to simply document a monster move that had run its course.  After spending  4 hours of this process, I'm actually believing that there is another big move still to come.  

Plug was somewhat neglected after the first run and perhaps Q2 earnings would take some by surprise. If there is a good entry point, PLUG might be worth a buy.  The downside risk is that with the expected earnings numbers already thrown out it might not cause the buying panic that leads to a monster move.  That being said, I believe a significant move to the down side is also limited.  

I'm very tempted to pick up some shared in advance.  I know, I know,  false positives. ...