Good morning, everyone. Many readers have asked me why I didn't buy any IPOs in the open market (other than scalping) yesterday, a marked departure from the days before, during which I ardently supported the buying of selected issues at the proper entry points (ITXC at 19 1/8, ATON around 45 1/4, MSCP at 8 1/16 to 1/8, KEYN at 17 1/2 to 18 plus many others). As well, instead of buying, I actually sold most of my IPO shares at or shortly after the open.
I formulated my afore-mentioned decisions on several factors: First, the manical trading pattern in FDRY on Tuesday alarmed me, leading me to suspect that all of a sudden many novice speculators are piling into the IPO aftermarket without knowing a thing about the underlying market dynamics and fundamentals. The confirmation came when I saw NTSL opened in the 30s, EFTD ran up to over 12 at one point and ShopNow managed to stay in the 15s for a long while. Based on these observations, I concluded that yesterday, at least as far as new IPOs are concerned, it's time to sell into unsustainable strength stemming from rampant and reckless speculaton.
The market is fluid, and this condition can change any time. I will be a buyer again when this mindless speculation subsides. |
