"Not as easy exactly, but every new IPO release
by the exchange,
we’re all like a wolves awaiting and
ready to bite for the easy meat share."

As a technical trader, I don’t read much about the financial statements of the company, IPO or Initial Public Offering in simple way is just a transition point of a company from the previous private to a publicly detained status.

Every IPO release by the exchange are mostly likely observed by hundred of buyer around the market, since all of us is looking forward as an inception of a new or better trading prospect.

The process on registration an IPO may take time or months of review from the exchange before it will be official publicly listed company. And every potential buyer has the right to review the company’s prospectus; legal documents, accounting data, detailed situation of the company, senior staff, majority stockholders, and most of all is the potential risk. After the company obtained the approval of the SEC, the newly publicly listed company will coordinate the banks and agreed a contract for the specific distribution of shares and the selling price based from the earnings of the company.

On this process, there are several insider buyers already took their slices before it reaches to the final investor (us) and commonly the selling price may be higher than the initial price.  This happens most of the times when the company that released stocks already enjoys the status as being a hot pick or deal. In short, individual investors will likely suffers from that old system, since the stock price is significantly above the IPO level before it reaches to the public hands.

To trick them back from this scenarios, learn to ride the momentum, as I always mentioned on short-term trading. The best way to hit profit from an IPO is to buy the stocks as early as possible and hope that the crowd will follow, and as per history, yes… they will do. Before this new publicly listed company will be crowded by another new buyers and speculators, established immediately your target price and be realistic that your target is really achievable.  Remember, your buying only this share for trading and not for your long-term investment as of now. When everything are all set, sell all your purchased stocks, run and enjoy your profit! Just back back again when the price will return to its fundamental value.

As you see, this strategy is not really investing but only trading your shares, from the principle of, “buy low and sell high.  If you’re only targeting 10% to 20% profit, it’s easily attainable target if handled properly.  But don’t forget that trading with IPO’s has higher risks, so you should also determine how far your tolerance can hold.

Good example I could give from our local publicly listed companies in the Philippines is the Century Peak Metal Holdings, Inc. (CPM).  From the opening on October 6, 2009, the stock price first posted is only Php1.50 per share, continuously surge until December 16, 2009 where it peaked at 7.10 per share. Based on that, lets say that you managed only to buy 3.0 per share and sold it at 6.0 per share, and then you profited 100% in just two months of holding a share. But after that blast, the company stock price is downed back to 3.50 per share until today.

Other examples that follow this formats are the AlphaLand Corporation (ALPHA), Integrated Micro-Electronics, Inc. (IMI), IP E-Game Ventures, Inc. (EG) and more, where they all surge in the first round or at the opening and all have return on their fundamental prices after blast which we usually called a “price correction”. As of now, the only pending application for IPO on Philippines Stock Exchange is the Cebu Air, Inc., their main subsidiary is the well known Cebu Pacific Airlines, providing air travel domestically and expected to expand further more international flights, that’s why they needed more funding and go to public, I assumed.

This strategy is not recommended for a newbie on stock market trading, it could be a double edge risk for you, if you’ll loss control especially to your own emotion. I could assure you that this could be more than the thrill you’ve experience from a roller-coaster ride.