Trade These Tricky Stocks Like a Pro

We’re off to a great start since Trump’s election.

There are tons of opportunities out there. The goal is to focus, focus, focus…

Today, I want to talk about Initial Public Offerings (IPOs) and how to trade them.

Two of them were asked about during my Premarket Prep session last week.

And my answer was very simple…

“Wait for the Oracle signal.”

Why?

Because IPOs have no price history…And without any history, we really have no idea if we’re dealing with a high-probability setup.

Remember, reliable patterns are based on price behavior we’ve already seen, and with an IPO, we have nothing to go on.

That’s why my go-to solution is Oracle.

If you don’t know about our proprietary algorithm, it gathers critical data every morning around 4 AM (when stocks start trading for the day).

Oracle then identifies 15 to 20 stocks based on criteria like price range, volatility, and premarket volume. With that list, you get a long, or short, entry price along with other data.

Oracle effectively filters out the noise, so you’re only focused on the best setups.

So, with IPOs, where we know next to nothing about the stock, our best solution is to use the algorithm.

Learn more about Oracle, the tool I couldn’t trade without, during one of our free live webinars. 

Now, let’s talk more about trading IPOs if you don’t have Oracle…

It’s a bit tricky, but I have some tips and tricks up my sleeve.

First, How Does an IPO Work?

In case you’re not familiar with it, an IPO happens when a private company decides to “go public” by offering shares of its stock to everyday investors.

Before the IPO, the company is privately held, typically owned by its founders, early investors, and maybe some venture capital firms. 

But as it grows, it may need more capital to expand, pay off debt, or invest in new projects. 

That’s where the IPO comes in, as a way to raise money by selling ownership stakes in the form of shares.

How Does the IPO Process Work?

Behind every IPO is a lot of preparation. Here’s a simplified rundown of what goes into it:

Filing with the SEC: 

The company must file a registration statement with the SEC (Securities and Exchange Commission) detailing its financials, business model, risks, etc. 

This is where you’ll find the prospectus, which gives you a bunch of info about the company’s health and plans.

Valuation and Pricing: 

Investment banks work with the company to determine the IPO price, which is based on how much they think the company is worth and how much demand there will be for the stock. 

This is where things can get hairy since overpricing can scare investors off, while underpricing could leave money on the table.

The Debut: 

On the day of the IPO, shares start trading on the stock exchange, often with a lot of fanfare.

At this point, it’s open season for regular traders like you and me to buy and sell the stock.

My Top Strategy for Trading IPOs

My strategy is what not to do: Do not trade an IPO on Day 1. 

Why?

Trading an IPO on the first day is just a guessing game.

I don’t care if it’s Robinhood, Apple, or SpaceX…You’re essentially gambling if you buy shares when they first start trading. 

The price action is erratic, there’s no clear trend, and you’re relying on hype rather than a structured trading plan.

As I said before, with no prior information to rely on, you’re going in blind.

The 3-Day IPO Strategy

So, how should you trade IPOs? 

Let the stock set itself up.

Instead of diving in on Day 1, give it at least 3 days to establish a trend.

Just like any setup, the RCT, VWAP Hold, etc., we need to see something that confirms we’re looking at a trade with a high chance of success. It puts the odds in our favor.

Here’s how this works:

Day 1: Pure Hype and Chaos:

The IPO launches with a bang. Volume is massive, price swings are wild, and emotions are at an all-time high. 

Sit on your hands, watch the action, and let the stock tell its story.

Day 2: The Reality Check:

Day 2 is usually a down day for the stock. 

Why? 

Because the excitement from Day 1 wears off, insiders start taking profits, and the selling pressure mounts.

Day 3 (or even later): The Breakout Opportunity:

By Day 3 or later, the stock has likely set a key level, which is often the IPO price or the high from Day 1. 

You’ve got your entry point when it breaks that level on strong volume.

Why is the IPO price so significant? 

It’s a psychological line in the sand, and when the stock breaks above it, everyone is in the green—insiders, institutions, and retail traders. 

That’s when the FOMO kicks in again, driving the price higher.

Using the Right Tools

Another tip for trading IPOs is to avoid the mainstream financial media—they’re often wrong, biased, or just chasing clicks. 

Instead, use tools and resources that give you real, actionable insights.

For me, Oracle is the best system for knowing what to do when an IPO enters the picture. 

Case in point:

Decent Holding Inc. (NASDAQ: DXST) had an IPO last Wednesday. This was one that I was asked about during Premarket Prep.

So what happened?

The price actually moved sideways on Day 1.

We didn’t have an Oracle signal that day. So traders that heeded my advice would not have traded it.

Then, on Day 2, it popped big and sank during premarket hours. 

And on that day, we did have an Oracle signal…

But it wasn’t a green buy signal, it was a red short signal.

And anyone that shorted it with the Oracle signal won big! 52%* big!

Take a look…

This is why I depend on Oracle so much, especially with rogue stocks like IPOs. Who knew we could reap a huge gain on a short trade? 

Oracle did.

To master IPO trading, you also need a great trading platform that features real-time data, charting, technical indicators, and more. 

My top pick, and the one I use every day, is StocksToTrade.

It features everything mentioned above…PLUS, right now, you can get two weeks of both the STT platform and our Breaking News Chat service for $17.

Grab your 14-day StocksToTrade + Breaking News Chat trial today for only $17!

My Final Thoughts…

IPOs are exciting, but they’re also traps for undisciplined traders.

If you want to succeed, you must approach them with a plan. 

To review, here’s what I suggest you do if you don’t have Oracle in your corner.

1. Identify the hottest IPOs with strong anticipation and volume.
2. Watch the price action on Day 1 and Day 2…and wait. 
3. Enter on the break of a key level—typically the IPO price—after 3+ days.

With this strategy, you’re not gambling. Instead, you’re executing a well-thought-out strategy based on market psychology and patterns that repeat time and time again.

Have a great day, everyone. See you back here tomorrow. 

 

Tim Bohen

Lead Trainer, StocksToTrade