Patterns play out in the stock market. All. The. Time. It’s something you have to know when considering whether the next big stock debut is a hot IPO or hype…
I know this very well … and it’s a huge part of my approach to trading and teaching.
But plenty of traders quickly forget that patterns don’t just play out on charts — they play out in sectors and specific types of stocks or investments, too.
A troubling pattern I’ve seen recently? Everyone rushing in to buy the hot tech IPO, only to get burned.
It keeps happening. Over and over. How many traders have to blow up before they see it?
Too little research, too much willingness to blindly follow trends … too much laziness. These are the problems … but there IS a solution. Let’s talk.
Table of Contents
- 1 Bought Uber? Uh Oh.
- 2 Hot IPO Burn: The Struggle Is Real
- 3 Don’t Be a Follower
- 4 Don’t Believe the Hype
- 5 Think for Yourself
Bought Uber? Uh Oh.
Real question for all $UBER $PTON $LYFT $WORK $SHMP $SNDD $GHSI $BANJ $TROV $ETFC $BTC $AMTD $NERV $AXXA $FNMA longs, hows that holding and hoping strategy going? How much do you have to lose before you wise the hell up? I’m curious what everyone’s breaking point is…seriously!
— Timothy Sykes (@timothysykes) October 1, 2019
You watched the news, you read the paper, and the message was clear: Invest in Uber’s IPO or you’ll miss out.
You set your alarm early on the big day so that you could rush in to buy shares before anyone else.
How much did you pay? Maybe you got in right away for about $45 per share.
Or maybe you got a late start and still bought in at $47, figuring it would only keep going up. How could it not, after all the awesome coverage it got?
… but then, to your horror, the price started to drop. And continued to drop.
But did you sell? Heck no. This was the next big thing, and it just had to rally, right?
But it didn’t. Shares fell to $30. You, my friend, were left holding the bag.
… and this is what happened with one of the hottest companies in the world.
The situation I just outlined is fictional, but it probably hits close to home for plenty of traders who rushed in.
Remember: fools rush in.
Hot IPO Burn: The Struggle Is Real
It’d be one thing if Uber’s hot IPO price drop was a one-off. But it wasn’t.
Traders with half a brain could have seen this coming.
Even a decade into the current bull market, this is a pattern that’s played out a ton of times in recent memory.
- WeWork couldn’t even pull off an IPO.
- Lyft’s (LYFT) IPO was a debacle, as I discussed in this article.
- Revolve (RVLV) was popular for a few days, peaking at just under $47, then shares fell to the low $20s.
- Peloton (PTON) was red-hot, initially priced at $29, and now they’re down nearly 20%.
It might play out a little differently every time, but it all adds up to the same story.
Ultimately the moral of this story is this: a lot of what people think is hot … is not.
Buy and hold is dead for ‘hot’ tech stocks.
Don’t Be a Follower
As a trader, how can you think differently about approaching the market? Here are a few ways…
Seek Out Knowledge
Knowledge is power when it comes to trading. When you keep learning, you get much better at thinking for yourself instead of just following the masses. Here are some ways to improve your trading know-how…
I established my Trading Challenge so that you can develop a foundation of knowledge that allows you to think for yourself as a trader.
At this point, there are thousands of resources available to students, ranging from an archive of webinars to hundreds of hours of video lessons. The Challenge offers you the perfect entry to trading in a supportive atmosphere with a group of fellow motivated traders.
— Matthew Kelm (@MattKelm812) October 4, 2019
FREE Penny Stock E-Guide
With so much free info out there, it’s really inexcusable that traders don’t take the time to actually learn the basics. My FREE Penny Stock E-Guide is a must-read if you want to trade low-priced stocks … Even if you’ve been trading for years, it never hurts to review the basics.
What a day so far. So much studying and growth today. Chose to not be lazy this weekend. I have to catch up to those ahead of me but need to focus and work at it first. Challenge yourself daily. Knowledge before success! 💪🏽 @timothysykes @profitly #striveforgreatness #stocks pic.twitter.com/nlTPvJEvzK
— Matthew Villalobos (@matttvillalobos) October 6, 2019
Explore Alternative Strategies
Take your education to the next step by learning how to approach the market differently. These books can help.
“An American Hedge Fund”
In my bestselling book “An American Hedge Fund,” I explain my methods for approaching the market and sniffing out opportunities that other traders didn’t see.
It’s not rocket science. It’s a matter of learning all you can and thinking for yourself. This book will help you get into the mindset.
“The Complete Penny Stock Course”
If you’re interested in trading low-priced stocks, “The Complete Penny Stock Course” should have a permanent spot on your bookshelf.
I wrote the foreword to this incredible book by my colleague Jamil Ben Alluch … it’s one of the best pennystocking guides on the market.
Got the kindle version of The complete Penny Stock Guide. @timothysykes
— David j Lessard (@djsmillions) October 3, 2019
Don’t Believe the Hype
The best way to blow up your account? Don’t use your brain — just buy up shares of the hot companies you hear about in the media.
You’ll get burned if you just listen to the hype.
The media doesn’t care about your trading. The media just talks about what’s hot – not what’s effective.
Twitter user @beaugeto gets it:
— Beaugeto Star 98 (@beaugeto) October 3, 2019
This is a big reason why I’m not a slave to the media. I don’t waste my time on the BS stocks that they talk about.
They gossip incessantly. This doesn’t help you as a trader or investor. So ask yourself…
… do you want to be entertained by gossip?
… do you want to play guessing games?
… do you want to pretend that you feel safe with all this BS?
Or do you want to take on strategies that aren’t covered by mainstream media?
Think for Yourself
One of the biggest keys to my success? Figuring out how to think for myself.
In Chapter 6 of “An American Hedge Fund,” I explain how I cut through the BS and made one of my biggest profits ever.
Check it out – this chapter is free to access online. I talk about how I made over $100K in a day as a college student on a first green day pattern. By avoiding the hype that drew in lazy traders who didn’t do their research, I made one of my biggest-ever profits on a single trade.
— Rami Z. (@Ramiz3684) October 1, 2019
How about a few more examples of recent successful trades?
TTCM was a first green day stock with a big breakout … I bought on strong volume, sold on Monday, and made 40% overnight. I could have made more, but I wanted to stay safe.
I wasn’t the only one. Profit.ly user PJustus took profits too:
“I took positions in both TTCM and DCGD. Just as you said DCGD did not continue to break into the .60s and .70s and I lost some of the profits I could have realized (roughly $800 dollars on my 5k account) I still profited some but a good lesson.”
No, you can’t make 40% every day, and it definitely doesn’t happen to me every day. But when that setup does present itself, I’m ready to take it. I sold too quick, but I still made a good profit.**
BILZF is another stock I held overnight on its first big green day with volume. I was in at the $1.30s and out around $1.90 … It went even higher, but I was still happy because I exited with a profit!
I wasn’t the only one to take advantage. Profit.ly user ParrotHead11 got in on it too:
“Bought this at confrence at $1.39 sold 4/5 of my position at $1.90 and the last 1/5f at $3 something. Following your advice! Thanks man.”
If you want to be a successful trader … don’t just follow what the press says. Sure, you can listen. But don’t act based on just that. Do your own research.
Focus on things that the media doesn’t cover. Look for these small niche opportunities where you can make not millions but a few thousand as you go. Focus on these patterns year in, year out, and it can build over time.
Focus on safe profits like student @jaretroberto!
Locked in safe profits of $475 on $HMLA in an hour. This is my 5th Green Day in a row. It’s very reassuring to see the benefits of of studying every day. In the short time of being @timothysykes challenge student I’m slowing molding myself into becoming a self sufficient trader.
— the_tipsy_nomad (@JaretRoberto) October 7, 2019
To really make the most of patterns, you’ve got to learn to think for yourself. This means breaking away from mainstream media, or at least taking what they say with a HUGE grain of salt.
What do you think about these IPOs? Leave your comment below.