Trade Idea: Who is Doug?

06/07/2022

IPOs have been fun to trade the last few months.

With a handful of data analytics subscriptions and the right data feeds, you can pick up on which ones traders have on watch or are even looking at to pump…

And while most have been great trades, there’s the occasional, newly-listed stock that has fallen by the wayside.

(Source: getyarn.io)

It happens…

But I’d encourage anyone trading right now to keep tabs on stocks listed within the last 3-6 months and watch for breakout potential.

Here’s one that’s been getting a push… Check out Douglas Elliman, Inc. (DOUG):

This is a stock that debuted a couple of days before the turn of the year, so chart history on the daily is limited… This is a relatively common pattern though.

IPO… quick bump… insider dump… and a swift short-selling beatdown.

The hourly, however, is starting to look bullish…

A quick look at the daily shows us that DOUG just broke into a green ATR Baseline (green volatility band) and one of my customized indicators is flashing buy.

…I like to wait a couple of bars for confirmation…

Notably, on the lower chart, the Squeeze Trading Tool 1.0 has flipped green on the histogram with the indicator signaling a squeeze setup. Whether or not this is to the upside remains to be seen, so we’ll look for more clues.

The Standard Deviation Channel (dotted channel) on the hourly just began pointing to the high side. It’s marginal, but still an improvement…

Even more bullish is the breakout from the bottom channel which I’ve marked in white.

The ping-ponging between the green support and resistance channels has now leveled up as the top channel was previously red.

As a long idea, I like the trade from the new support in the ~$5.55-$5.70 area based on the hourly chart.

Using this as a BUY zone, it gives about a 3.25:1 risk/reward ratio using one standard ATR (14 period) as an initial stop and then trailing my stop by the same measure.

The target is solely based on daily resistance, but the stock needs to break above the recent high (white arrow).

Considering this trade idea is based on a potential bottom, a wider stop level is likely to be hit if DOUG breaks below…

I’d stay patient on the buy and watch the broader market’s price action first.

Keep moving,

(Disclosure:  I hold no position in DOUG.)

This material is not an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Any performance results discussed herein represent past performance, not a guarantee of future performance, and are not indicative of any specific investment. Due to the timing of information presented, investment performance may be adjusted after the publication of this report. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, equal any corresponding indicated historical performance levels or be suitable for your portfolio.

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