Trading IPO EHealth Inc – EHTH

After a week where it seemed the Big Boys were taking the market up in slow motion, it was satisfying trading a couple of initial public offerings that played out beautifully. I mentioned yesterday to watch gold and oil stocks and the ipo market. I was disappointed to see gold and oil stocks gapping, so focused on the IPOs.

I don’t see many traders trade IPOs. I’m not sure why, because I love them. Why? The areas of support and resistance are defined, and there’s no overhead at day highs. Let’s look at the first candidate today, EHealth Inc. – EHTH.

You could consider the first red bar of Acme Packet’s stock as being a capitulation bar. Those investors lucky enough to get allocated shares, dump them. Point 1 (BL2)of the EHTH 5-minute chart show the first entry that was taken. IPOs can trade fast. Profit was taken when a point was achieved. EHTH built an area of support just above the area of 22 with a couple of quick dips. I had an alarm set in the 22.2 area to alert me, but was in the bathroom at the time. What can you do sometimes! Point 2 (BL2) shows the next entry. Point 3 shows an area of resistance the stock needed to mount. A BL3 occurred with an hour of online stock trading to go. The stock is added here, or you buy the stock if you missed the earlier entry. I can’t emphasize enough how looking at multiple time frames has made me a better trader.

For those who want to cut out all the small dips, the hourly proved a clean trading pattern.

It’s interesting evaluating stocks after I’ve traded them. It’s also extremely helpful. Reinforcing trading patterns in the old brain, makes it that much easier to take them automatically the next time they appear.