How to trade an IPO Base Breakout
And the simplest way to know when IPO base Breakouts are outperforming the Market.
"Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime"
IPO Base Breakouts are one of the most lucrative setups to trade.
Why?
Because as young stocks, the upside potential is huge and yet to be fulfilled.
(Imagine Messi or Tendulkar at 19)
But most beginners struggle to trade them correctly.
In this article, I will discuss:
When to trade IPO Base Breakouts?
Different kinds of IPO bases.
2 kinds of IPO base Breakout entries.
How to scan for IPO stocks?
When to trade IPO Base Breakouts?
Trade IPO Base Breakouts when they are following through higher than other breakouts, or higher than the average.
How to know when IPO Base Breakouts work better?
Well, you can manually go through the IPO stocks and see if they are breaking out.
Or,
Just look at the IPO index.
If this index is outperforming the general market (CNX500) then the IPO Base breakouts are indeed following through and giving a better return.
Simple.
Post-Covid trading IPOs would have generated outperformance.
They underperformed from Dec-2021 to March 2023 and started the outperformance again.
Right now, IPOs are the most outperforming group in the markets.
Different kinds of IPO bases:
IPO bases can come in various shapes and sizes.
Shapes:
Flatbases.
Flatbases with a small slope (positive or negative).
Ascending Triangles.
Descending Triangles.
Symmetrical Triangles.
Inverse head and Shoulders.
Sizes: Length and Depth.
Some bases range from a few days to weeks (small base) while some others take a few months to years (big base).
Some are shallow (10-20%) while some can be deep (50-80%).
A bigger (and longer) base breakout gives a bigger move most of the time.
But some smaller bases also tend to do very well.
What seems to matter the most is the tailwinds.
Eg: IPOs like Symra and Kanyes had smaller bases but still went on to give >100% return in a short period of time. This is clearly because of the tailwinds in the electronic manufacturing sector.
Names like IRFC and Cochin Shipyard had to wait while making longer bases for the tailwinds to kick in before they started to perform.
2 kinds of IPO base Breakout entries:
A stock after listing will do 1 of 2 things:
Will go up and form a pivot high and then go sideways (base) before breaking out.
Will go down and form a pivot low and then go sideways (base) before reversing the downtrend (and eventually breaking out of the IPO pivot high or forming a larger base).
If it does 1, then the entry is a simple Base Breakout entry.
Mostly this base breakout will coincide with a breakout above the 1st Pivot high if it’s a flatbase. The entry point will be slightly different if the base is not a flat base but rather has a slope (Triangular/wedging base).
Some recent examples:
If it does 2, then the Cheat/Low cheat pivot entry opens up.
Post the downtrend, before the reversal, a tight area is generally built. A breakout of this tight area is a tradable entry. This entry is at a lower level than the main IPO pivot high, and hence called a cheat entry. This lingo comes from the legend Mark Minervini.
Most of the IPO Base Breakout entries will fall into one of these 2 categories.
Bonus Entry type:
As soon as the entry day high breaks out, there is a possible entry (with or without the basing action).
This is akin to the open-range breakout type of an entry.
More like Thumbs Up, aaj kuch Toofani karte hai kinda entry.
One that I do not like at all.
How to scan for IPO stocks?
Well, you can scan manually or just run this simple scanner below:
https://chartink.com/screener/shipo-5-years
Change the last line of the code (1 year ago shown right now) as per your requirement
Lastly. here is the live session we had on IPO base breakouts:
Follow the channel for more in-depth super sessions.
Quick Quiz for you:
:
That's all for today.
That there are N number of ways to make money.
But real mastery comes from honing 1 (or a few) setup.
IPO base Breakout surely looks like a prime candidate.
But it may not be for you.
It’s okay to take some time to figure if it is or not.
Not sure yet about your style and method?
Sakatas Homma helps you find it one step at a time.
I do that in 2 ways:
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Watch my 1st session of the spring 2023 batch.
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Thanks Prakash for this wonderful information.. Keep growing
Presentation of the article is brilliant
and info about ipo's is too good
Thankyou Parkash ✨