An initial public offering (IPO) is when a company offers shares of stock to the public for the first time. A company typically uses the services of underwriting brokerage firms or other companies experienced in picking the best offering price and timing for the offering. Initial public offerings can be a startup company looking for capital to bring products to market or it may be an established private company looking to be registered on a stock exchange and to sell stock to raise capital without borrowing. IPO’s can be excellent investments. However, buying stock in an IPO can also be risky as there is often a series of ups and downs in stock price after issuance of the IPO.
To find out what companies are making initial public offerings or have just made them a simple stop at the hoovers.com web site will provide a list as well as basic financials. When investing in or trading stock in IPO’s fundamental analysis is important but so are a firm grasp of Candlestick basics and Candlestick pattern formations. Add a fair amount of psychology of investing and the investor is ready. A well managed IPO underwriting firm can do such a good job of presenting the company to the public that the IPO sells out quickly at the offering price. If the underwriting firm has really done its job the IPO will have been all over the stock market news and discussed in numerous stock market newsletters. This degree of attention will often serve to drive up the price of stock shares as those who did not buy at the offering price (maybe the IPO was sold out) try to get in on a good thing.
IPO’s are easily subject to fundamental analysis of the value stock investing sort as they have products, belong to market sectors, and have competitors with whom to compare. However, technical analysis with tools such as Candlestick chart analysis can be a different matter because the stock has never traded on the stock market before. It has no trading history! Over the longer term IPO’s may represent winning stocks or losing stocks but in the days after the initial public offering there can often be a predictable pattern to the stock prices of IPO’s. A common pattern is that a popular IPO sells out very early so that no stock is available at the initial offering price. Then the stock is bid up substantially.
2. An initial public offering (IPO) is
when a company offers shares
of stock to the public for the first
time.
By: www.CandleStickForums.com
3. A company typically uses the
services of underwriting brokerage
firms or other companies
experienced in picking the best
offering price and timing for the
offering.
By: www.CandleStickForums.com
4. Initial public offerings can be a
startup company looking for
capital to bring products to market
or it may be an established private
company looking to be registered
on a stock exchange and to sell
stock to raise capital without
borrowing. IPO’s can be
excellent investments.
By: www.CandleStickForums.com
5. However, buying stock in an IPO
can also be risky as there is often a
series of ups and downs in stock
price after issuance of the IPO.
By: www.CandleStickForums.com
6. To find out what companies are
making initial public offerings or
have just made them a simple stop
at the hoovers.com web site will
provide a list as well as basic
financials.
By: www.CandleStickForums.com
7. When investing in or trading
stock in IPO’s fundamental
analysis is important but so are a
firm grasp of Candlestick
basics and Candlestick pattern
formations.
By: www.CandleStickForums.com
8. Add a fair amount of psychology of
investing and the investor is ready.
A well managed IPO underwriting
firm can do such a good job of
presenting the company to the
public that the IPO sells out
quickly at the offering price.
By: www.CandleStickForums.com
9. If the underwriting firm has really
done its job the IPO will have been
all over the stock market news and
discussed in numerous stock
market newsletters.
By: www.CandleStickForums.com
10. This degree of attention will often
serve to drive up the price of stock
shares as those who did not buy at
the offering price (maybe the IPO
was sold out) try to get in on a
good thing.
By: www.CandleStickForums.com
11. IPO’s are easily subject to
fundamental analysis of the value
stock investing sort as they have
products, belong to market
sectors, and have competitors with
whom to compare.
By: www.CandleStickForums.com
12. However, technical analysis with
tools such as Candlestick chart
analysis can be a different matter
because the stock has never traded
on the stock market before.
By: www.CandleStickForums.com
13. It has no trading history! Over the
longer term IPO’s may
represent winning stocks or losing
stocks but in the days after the
initial public offering there can
often be a predictable pattern to
the stock prices of IPO’s.
By: www.CandleStickForums.com
14. A common pattern is that a
popular IPO sells out very early so
that no stock is available at the
initial offering price. Then the
stock is bid up substantially.
By: www.CandleStickForums.com
15. As an example, one who is paying a
premium for the stock is a naïve
individual who engages in
occasional buying for long term
investing and who believes all the
hype put out by the underwriting
firm. He thinks the stock will be a
great long term addition to his
portfolio.
By: www.CandleStickForums.com
16. Another is the day trader who sees
high volume and a stock trend. The
trader jumps on and rides the stock
up, watching market volume and is
alert for pull backs. The trader is more
interested in trend analysis that the
long term prospects of the stock. A
trader, or investor, who makes a study
of IPO’s will see a number of unique
patterns.
By: www.CandleStickForums.com
17. For example, one common pattern
is for the price of the stock to rise
after the IPO, over correct
downwards, and then gradually
climb to a more stable price. The
judicious use of Candlestick chart
formations can be useful in this
instance to make profits on initial
public offerings.
By: www.CandleStickForums.com
