Hot IPO or Hype?

Patterns play out in the stock market.

All. The. Time.

It’s something you have to know when considering whether the next big stock debut is a hot IPO or hype…

And with SpaceX launching … its IPO … next week, this is an important lesson for every trader.

I know this very well and it’s a huge part of my approach to trading and teaching.

But plenty of traders quickly forget that patterns don’t just play out on charts — they play out in sectors and specific types of stocks or investments, too.

A troubling pattern I’ve seen recently? Everyone rushing in to buy the hot tech IPO, only to get burned.

It keeps happening. Over and over. How many traders have to blow up before they see it?

Too little research, too much willingness to blindly follow trends … too much laziness. These are the problems … but there IS a solution.

Let’s talk.

Bought Uber? Uh Oh.

You watched the news, you read the paper, and the message was clear: Invest in Uber’s IPO or you’ll miss out.

You set your alarm early on the big day so that you could rush in to buy shares before anyone else.

How much did you pay? Maybe you got in right away for about $45 per share.

Or maybe you got a late start and still bought in at $47, figuring it would only keep going up. How could it not, after all the awesome coverage it got?

But then, to your horror, the price started to drop. And continued to drop.

But did you sell? Heck no. This was the next big thing, and it just had to rally, right?

But it didn’t. Shares fell to $30. You, my friend, were left holding the bag.

And this is what happened with one of the hottest companies in the world.

The situation I just outlined is fictional, but it probably hits close to home for plenty of traders who rushed in.

Remember: fools rush in.

Hot IPO Burn: The Struggle Is Real

It’d be one thing if Uber’s hot IPO price drop was a one-off. But it wasn’t.

Traders with half a brain could have seen this coming.

Even a decade into the bull market, this is a pattern that’s played out a ton of times in recent memory.

For example…

• WeWork couldn’t even pull off an IPO.

• Lyft’s (LYFT) IPO was a debacle.

• Revolve (RVLV) was popular for a few days, peaking at just under $47, then shares fell to the low $20s.

• Peloton (PTON) was red-hot, initially priced at $29, and before dropping nearly 20%.

It might play out a little differently every time, but it all adds up to the same story.

Ultimately, the moral of this story is this: a lot of what people think is hot … is not.

Buy and hold is dead for “hot” tech stocks.

Don’t Be a Follower

As a trader, how can you think differently about approaching the market? Here are a few ways…

Seek Out Knowledge

Knowledge is power when it comes to trading. When you keep learning, you get much better at thinking for yourself instead of just following the masses.

With so much free info out there, it’s really inexcusable that traders don’t take the time to actually learn the basics.

Explore Alternative Strategies

Take your education to the next step by learning how to approach the market differently.

Don’t Believe the Hype

The best way to blow up your account? Don’t use your brain — just buy up shares of the hot companies you hear about in the media.

You’ll get burned if you just listen to the hype.

The media doesn’t care about your trading. The media just talks about what’s hot — not what’s effective.

Twitter user @beaugeto gets it:

Source: X

This is a big reason why I’m not a slave to the media. I don’t waste my time on the BS stocks that they talk about.

They gossip incessantly. This doesn’t help you as a trader or investor. So ask yourself…