Pro Breaks Down History’s Largest IPO

“Take some time and catch this limited replay of Ben Sturgill covering the ARAMCO IPO. I love how he breaks down his processes into easy-to-digest bites.” – Jeff Bishop

“You don’t want to miss this replay. You asked for it! Ben is delivering!” – Jason Bond

Stocks are looking at a modest open this morning after a brutal sell-off in large-cap tech stocks on Monday…

Tech giants like Amazon (-4.6%), Alphabet (-6.1%) and Facebook (-7.5%) all took a hit after it was reported that the government might be looking into these companies, their business practices, and if they’re in any violation of any antitrust laws.

I don’t think this is going to go anywhere (politics as usual)… and do see these stocks as potential buying opportunities soon.

In fact, I nibbled on some AMZN calls yesterday morning…  you can follow my live portfolio feed right here.

Markets tend to overshoot themselves… and sentiment does too.

We got very negative all of a sudden…and expecting a bounce of some sorts is very possible from here.

Furthermore, several Federal Reserve officials give talks today, including the Chairman, Jerome Powell. Rumors are circulating that the Fed may cut interest rates if the trade war continues, which is usually very bullish for stocks.

So, while I’ve been warning clients about the Death Line and its impact on the market. I am also looking to get long some “money pattern” approved stocks…

That said, not many stocks have been hotter than IPOs.

 

 

And one I’m really liking right now is Luckin Coffee (LK), “the Starbucks of China.”

 

 

(That was sent to clients on 5/29, if you missed this one then too bad, but don’t miss the next, join WMM now)

 

(You thought the money pattern just worked on crashing stocks? Think again)

Read on about my trade in LK, and how to use the money pattern to spot trades like this one in the future.

 

Trading Initial Public Offerings (IPOs) Using Chart Patterns

 

The markets have been getting ugly out there… and tech stocks have entered correction territory yesterday after news about a possible DOJ investigation against Google, dragging other tech giants down with it.

We saw Facebook (FB) drop 7.51% after the Wall Street Journal reported that the FTC may look to investigate the social media giant.

Now, I wasn’t too worried about that news… as I was long a stock that had nothing to do with tech stocks…

… in fact this trade was a recent initial public offering (IPO) that I let clients know I was watching about a week and a half ago.

 

 

Now, you’re probably wondering… “Jeff, weren’t you worried about the IPO market drying up after LYFT and UBER sold off?”

No actually.

I was focused on my charts with this trade…

… let me walk you through it.

 

The Money Pattern Works With IPOs

 

Now, Luckin Coffee (LK) priced its IPO at $17 per share… keep this level in mind because knowing where the IPO price is could uncover trading opportunities.

If you haven’t heard yet, LK is a Chinese coffee company that competes with Starbucks’ China.

Luckin Coffee is an express coffee chain that’s taking on Starbucks (SBUX) by focusing on smaller, to-go focused stores… and it’s the second largest coffee shop chain in China.

Well, there is a lot of growth potential in Luckin Coffee… however, with the market being extremely volatile… LK actually fell below its IPO price at one point.

Generally, when we see this… it could be a buying opportunity.

However, I didn’t just buy LK once it broke below the $17… I actually waited for my money pattern.

 

 

Notice the blue horizontal line?

That’s the IPO price.

If a stock breaks below its IPO price shortly after… it’s time to start looking at the stock and indicators.

For example, I’m looking at the 13-period simple moving average (SMA) and the 30-period SMA on the hourly chart.

Keep in mind, when you’re using moving averages… it’s a lagging indicator. For example, the first data point for the 13-hourly SMA is calculated by summing the close of the previous 13 hourly candlesticks… and so on.

That said, this actually allows us to remove some of the noise in the price action and see the overall trend… the shorter the SMA period… the closer it follows the trend of the stock.

Now, if I’m looking for a bullish trade… I want to see the 13-hourly SMA cross above the 30-hourly SMA.

You see, when the shorter-term SMA (the 13-hourly SMA) crosses above the longer-term SMA (the 30-hourly SMA)… it’s an indication that the overall trend is shifting up… and that means the stock could run higher.

Here’s what I’m talking about…

 

 

Notice how once the blue line crossed above the red line… the stock started to run higher.

Well, that was actually expected with LK.

Here’s what the stock actually did.

 

 

Right when I saw the bullish crossover, I picked up shares of LK… and just a few days later I was sitting in profits…

Now, I don’t always trade stocks… but the options in LK weren’t as liquid… so it made more sense to buy stock. Also, it’s not an expensive stock so it didn’t take up too much of my trading capital, so having leverage wasn’t really necessary.

 

(If you want to receive alerts on trades like these, click here to get started)

The market is pretty shaky… but we’re still finding opportunities and finding success even in this market selloff. Sticking to my charts has allowed me to remain green in this weak market… and I’m expecting more winners like these very soon.

If you want to learn more about my approach, receive real-time email and text alerts, and so much more… click here to get started.

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