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Last Thursday I covered
Sprouts Farmers Market ( NASDAQ:SFM ) and I was noting that this was fitting into
my IPO strategy, which is really
pretty simple. You look at the initial high, where ever the stock
trades,
might be on the first day like with respect to Facebook ( NASDAQ:FB ),
or might be within two or three days like here,
it could be much longer. But you look and see
where the stock is trading in relation to that first
over exuberance high
that ultimately leads to a pullback. It's amazing how many times
a stock comes up against that same level
and then pulls back. I'm not talking about this, but I'm talking about
some sideways consolidation. Maybe ultimately it drifts higher,
but it's amazing how many times the stock
struggles with this, pulls back,
and then ultimately does blast through.
You can trade this stock in here, I'm not saying not to trade this
stock in here, I don't care, knock yourself out.
What I'm saying is, on this particular strategy,
what you do is you wait for the stock to close
at a new high, a new high relative to this.
It would be an all-time high. The first
all-time high was right here,
that was the all-time closing high. So then what do you do?
You buy the stock. So let's see how that played out
on Friday. You can see the stock gapped up,
but you can see the stock, right off the bat, came up here,
and early on blasted off. So if you're
in here at 42.50,
you get a couple bucks, you get a nice
five percent move
pretty quick. But then the stock,
after that it just kind of petered out. By the way, this was what was happening to the
market,
everything was trading down. The only thing that wasn't
was this one, Facebook ( NASDAQ:FB ),
towards the end of the day. Netflix ( NASDAQ:NFLX ) kept trickling sideways.
Tesla ( NASDAQ:TSLA ), always a crowd favorite,
trickling sideways. And Sprouts ( NASDAQ:SFM )
pretty much did the same thing, came up and then was trickling
sideways. We got a little buying into the close, but here's the deal;
if you bought this stock and flipped it for a day trade, nice trade. I'll take five
percent on a day trade anytime.
But now, the thing is, I'm not going to say it's formed a
tombstone doji,
where the
close and the open
are very close together right at the intraday low.
That's not the case here. I think this is still
what I would call a power move, a very nice move higher
on super strong volume. In this case though, I think the stocks due for a rest,
particularly with the market resting. So the stock continues to close
up above the upper Bollinger Band, which is a sign of strength, that's a good
thing.
But I can't buy this stock right now, hopefully you get
a couple of red days, and then
look to buy this stock if it pulls back to 41.00,
something like that. I have no idea what the valuation is on
this company, I'm sure it's probably pretty high.
Every time I go into one of these supermarkets
they're always pretty crowded,
and their food is always really expensive; not like whole paycheck
otherwise known as whole foods,
but I think this stock is ultimately going to go higher, you just want to be
careful now
about how you enter it. But the IPO strategy has been triggered,
so it's a stock that you want to own.