{"id":4066,"date":"2014-07-11T09:14:52","date_gmt":"2014-07-11T13:14:52","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=4066"},"modified":"2022-04-06T15:05:03","modified_gmt":"2022-04-06T19:05:03","slug":"ipo-momo-anet","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/ipo-momo-anet\/","title":{"rendered":"Playing The &#8220;IPO Momo&#8221; For A Quick 15% Gain ($ANET)"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-medium wp-image-4074\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/aristalogo-300x46.jpg\" alt=\"$ANET logo\" width=\"300\" height=\"46\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/aristalogo-300x46.jpg 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/aristalogo-110x17.jpg 110w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>Whenever I post an\u00a0educational trade review on this blog, the technical trade setup is usually of the breakout or pullback variety (details <a title=\"Overview of winning swing trading system\" href=\"https:\/\/www.morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noopener\">here<\/a>).<\/p>\n<p>Today, I&#8217;m excited to walk you through a different kind of\u00a0<em><a title=\"Signup for The Wagner Daily newsletter\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"nofollow noopener\">Wagner Daily<\/a>\u00a0<\/em>trade that was recently bought and sold with a <strong>15% price gain over just a 3-day holding period.<\/strong><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/ipo-momo-anet\/#Trading_The_%E2%80%9CIPO_Momo%E2%80%9D_Setup_On_A_Pullback\" >Trading The &#8220;IPO Momo&#8221; Setup On A Pullback<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/ipo-momo-anet\/#When_A_Rally_Is_Too_Strong\" >When A Rally Is Too Strong<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/ipo-momo-anet\/#Why_Trail_A_Stop_Instead_Of_Simply_Selling\" >Why Trail A Stop Instead Of Simply\u00a0Selling?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/ipo-momo-anet\/#Luck%E2%80%A6Or_Not\" >Luck&#8230;Or Not?<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Trading_The_%E2%80%9CIPO_Momo%E2%80%9D_Setup_On_A_Pullback\"><\/span>Trading The &#8220;IPO Momo&#8221; Setup On A Pullback<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Because recent <a title=\"What is an IPO?\" href=\"https:\/\/www.cnbc.com\/id\/47099278\" target=\"_blank\" rel=\"noopener\">IPOs<\/a> trade with a limited price history, it is frequently challenging to apply standard technical analysis techniques to determine ideal, low-risk buy entries.<\/p>\n<p>However, even though\u00a0recent IPOs lack extensive price data, the same technical analysis strategies I use daily for finding high-momentum breakout and pullback setups works great for recent IPOs.<\/p>\n<p>The main difference is that <strong>this type of momentum (momo) stock trade is\u00a0viewed with a much shorter time horizon<\/strong> of days, rather than weeks or months, because of the more limited price history.<\/p>\n<p>In the first chart below, I have highlighted the initial pullback in Arista Networks ($ANET) that caught my attention late last month:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4068\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/ANET11-e1405079680597.png\" alt=\"$ANET buy entry\" width=\"800\" height=\"698\" title=\"\"><\/p>\n<p>With the &#8220;IPO Momo&#8221; trade setup, I look for a substantial move higher in a recent IPO, followed by a lighter volume 50% to 61.8% Fibonacci retracement (pullback to support).<\/p>\n<p>Upon spotting such price action, the stock enters my internal watchlist as a potential short-term momentum trade, BUT I also wait for a bullish reversal candle (or opening gap higher) to form.<\/p>\n<p>Waiting for the formation of a reversal candlestick on the daily chart, then planning a buy entry above the high of that candlestick, is a great way to lower your risk because it helps to confirm that the pullback off the highs\u00a0is likely finished.<\/p>\n<p>The next chart of $ANET shows how the pullback led to my buy entry setup a few days later:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4069\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/ANET2-e1405079756545.png\" alt=\"$ANET buy entry 2\" width=\"800\" height=\"698\" title=\"\"><\/p>\n<p>As annotated on the chart above, the bullish reversal candlestick that formed on June 25 was followed by two consecutive <a title=\"What is an &quot;inside day?&quot;\" href=\"https:\/\/www.investopedia.com\/terms\/i\/inside_day.asp\" target=\"_blank\" rel=\"noopener\">inside days<\/a>.<\/p>\n<p>This pattern provided me with a low-risk buy setup in $ANET if it rallied above the downtrend line of the pullback.<\/p>\n<p>As such, I officially added $ANET to the stock\u00a0watchlist section of my <a title=\"The Wagner Daily\" href=\"https:\/\/www.morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"nofollow noopener\">nightly stock pick newsletter<\/a>\u00a0on the evening of June 29,\u00a0and provided subscribers with my exact buy trigger, stop, and target prices for this IPO Momo trade setup.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"When_A_Rally_Is_Too_Strong\"><\/span>When A Rally Is Too Strong<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The following day (June 30), $ANET triggered my buy entry by gapping open above the downtrend line and prior day&#8217;s high.<\/p>\n<p>Although $ANET closed weak on the day of entry, the stock rocketed 21.8% higher the following day.<\/p>\n<p>Initially, I was quite pleased by such an\u00a0explosive move just one day after entering the stock.<\/p>\n<p>However, upon further analysis, I felt the <strong>July 1 rally could actually be a sign of near-term exhaustio<\/strong>n\u00a0(due to the\u00a0monstrous move in terms of price and volume).<\/p>\n<p>If it was indeed an exhaustion move, I did <em>not<\/em> want to stick around in $ANET because it would likely just chop around in the days and weeks that followed.<\/p>\n<p>As such, I\u00a0raised my stop price to protect the quick and easy gain of the prior day:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-4070\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2014\/07\/ANET3-e1405079805183.png\" alt=\"$ANET sell into strength\" width=\"800\" height=\"698\" title=\"\"><\/p>\n<p>As highlighted on the chart above, $ANET hit my tightened stop the following day, enabling me to lock in a <strong>quick 15% gain with a 3-day holding period.<\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_Trail_A_Stop_Instead_Of_Simply_Selling\"><\/span>Why Trail A Stop Instead Of Simply\u00a0Selling?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If i was concerned that $ANET was facing price exhaustion, you may be wondering why I chose to raise my stop, rather than just selling to lock in the easy profit on the following day&#8217;s open.<\/p>\n<p>The tightened stop (rather than immediate exit) would still allow subscribers to participate in further upside potential, just in case $ANET had a bit more bullish momentum remaining.<\/p>\n<p>More specifically, <strong>I was willing to risk giving back 5% or so in profits to potentially catch another 10-20% run.<\/strong><\/p>\n<p>Obviously, I indeed gave back about 5% of the gain by trailing a stop, but I still made the correct decision and faced no regret (one of the <a title=\"4 most dangerous emotions for traders\" href=\"https:\/\/new.morpheustrading.com\/blog\/trading-psychology\" target=\"_blank\" rel=\"noopener\">4 most dangerous emotions<\/a> for traders).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Luck%E2%80%A6Or_Not\"><\/span>Luck&#8230;Or Not?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The explosive rally of July 1 was admittedly triggered by news of a brokerage upgrade that morning.<\/p>\n<p>Therefore, one\u00a0might reasonably argue that this winning stock trade was merely the result of luck.<\/p>\n<p>However, I have learned over the years that <strong>good things happen when you buy the right stocks at the right time<\/strong>, especially in a strong market.<\/p>\n<p><em>If you liked my article, please share the love with your favorite social network (click icons on the left).<\/em><\/p>\n<div class=\"cfmonitor\" style=\"padding-top: 30px;\"><center><script src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\"><\/script><!-- Footer of content - Large --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 336px; height: 280px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"6017996961\"><\/ins><script>\/\/ <![CDATA[\n(adsbygoogle = window.adsbygoogle || []).push({});\n\/\/ ]]><\/script><\/center><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Whenever I post an\u00a0educational trade review on this blog, the technical trade setup is usually of the breakout or pullback variety (details here). Today, I&#8217;m excited to walk you through a different kind of\u00a0Wagner Daily\u00a0trade that was recently bought and sold with a 15% price gain over just a 3-day holding period. Trading The &#8220;IPO [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-4066","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4066","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=4066"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4066\/revisions"}],"predecessor-version":[{"id":11318,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/4066\/revisions\/11318"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=4066"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=4066"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=4066"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}