01/26/2022
I find myself day trading more than I’d like lately…
And believe it or not, most of the trades I’m taking are warrants or the thing I almostnever buy into: Recent IPOs.
I’ve made mention of this before…
The lack of chart history… insider selling… lockup periods… they can bite you in the tail fast.
But one that I’ve been looking at closely for my longer term portfolio is a stock that, in my opinion, hasn’t received enough attention.
With a focus on workforce SaaS solutions, it’s one that a number of hedge funds have been nibbling at, including notable names like Dave Tepper at Appaloosa and Eric Bannasch of Cadian Capital…
Now, just because hedge funds take a position doesn’t mean it’s an automatic “buy.” They have their own strategies and things can get murky when you start involving options and warrants…
Nonetheless, here’s the new blood — Alight, Inc. (ALIT):
We’re on the daily time frame, but the furthest we can go back is July of last year whenALIT went public.
You’ve got the typical IPO run-up, followed by the slow fade…
I say it’s typical, however, it’s only typical in that this is just one of the common IPO patterns… I’ll cover the others at another time.
Now that the stock is nearing its IPO price, I’m watching it carefully…
What I want to first point out is the falling Regression Channel (red and green)…
I tend to swing trade more often than I day trade and swing traders such as myself love seeing these.
Why? You can be extremely lazy.
And if you’re busy with work, school, family, etc., you likely don’t have time to be glued to your monitors… so trade the channel.
I’ve drawn a Fibonacci Retracement with extensions showing below, hence the expansion on the chart.
As I mentioned, IPOs have limited chart history and if there’s a new low, looking left won’t help you much. The extensions offer ideas in looking for likely next stops…
But look at the Volume Profile off to the right. See how the current price action is below the lit part of the indicator or “Area of Value”? This can be concerning in a downtrend as it could signal further downside.
And then there’s the recent volume spike at the most recent low… confusing, yeah?
Welcome to technical analysis…
But this at least tells us that bulls bought the dip and they went hard when they did…
On the lower chart, the MACD is also curling upwards which is a bullish sign.
Now, with the current market environment, it could be risky going long, so I’ve drawn in two scenarios for taking a long position today…
The stock could continue its pattern and finally break free of the channel to begin its reversal, or it pulls down on market action and heads for new lows.
Risk off below $8.75, but I like the odds here… at least for a swing.
Keep moving,
(Disclosure: I have no position in ALIT, but intend to initiate a position in the next 30 days.)
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.
