Snowflake perking up, Figs breaking out, SoFi coiling: IPO trader

Kathy Donnelly joins Yahoo Finance's Jared Blikre to discuss Trading IPOs and SPACs.

Video Transcript

ZACK GUZMAN: Welcome back. Let's get technical here with Yahoo Finance's Jared Blikre as we move into the midpoint of 2021, maybe resetting the market moves that we've seen with some of the newer entrants when it comes to IPOs and SPACs. Clearly, SPACs slowing down a bit. But for more on that, I want to bring on Jared Blikre with a special guest today. Jared.

JARED BLIKRE: That's right, and we have the IPO expert with us. That's Kathy Donnelly. She is a proprietary trader and a co-author of "The Life Cycle Trade." Kathy, it's great that you could join us today. We have a lot of IPOs in the calendar. I thought we'd take a look at some that have been trading for a while. And you can give us your perspective. And we'll start with Snowflake. I'm going to pull up a one-year chart so we can see the entire price history, going back to whatever. It looks like last September. Look at that big pop on the opening day. It didn't last, did it?

KATHY DONNELLY: No, it didn't last. But I mean, I will say it did have a successful IPO advanced phase that we talk about in the book. And now it's been an institutional due diligence phase. It just started showing of-- it's been trading over 40 weeks now. And it's about 5% or so below the 40-week line. So I think it's one to watch to see if it's going to start that institutional advanced phase. It'd be nice to see it create a base just over that 40-week line.

JARED BLIKRE: Yeah, let me-- could you just break down that institutional advanced phase that you talk about? You have several phases in your book. Because when an IPO trades for the first time it lists, it takes a while to get some price history in there and for institutions to do their due diligence and see if they want to buy it or not. Is that right?

KATHY DONNELLY: Yeah, that's exactly right. The IPOs can have a really exciting initial advance when they first start trading publicly. But usually, it's about six months to a year and sometimes two, three years, where it just goes sideways. And often, it undercuts that initial gain that it made and that initial base that it created, which Snowflake did.

And so now we're really in that period, where it could be transforming, and switch from that due diligence phase, six months to a year or more, into an advance that may last one or two years or more. And that's what really, I find, is the most rewarding stage of the stock, really getting in there early, that first mature base when the institutions have decided this is the one I want to invest for the long haul.

JARED BLIKRE: Got it. Let's move on to FIGS here, ticker, FIGS. Not as much price history, but it looks like it's breaking to the upside here.

KATHY DONNELLY: Yeah, I wanted to talk about this one because this is a really interesting story. It's like the Lululemon for healthcare workers, for scrubs. They wear these scrubs. And a lot of times, they don't look very stylish or very comfortable. But now, there's a solution for them. And it's FIGS.

And it's already created a base. And it's in that IPO advanced phase that I was talking to you about just a few minutes ago with Snow. So it isn't necessarily viable right now, unless you're a quick swing trader. You can find an early entry. It could come back to that buy point from that IPO base since, you know, IPOs are usually very volatile. But it might have a nice little run.

And then, two, we'll be looking for an institutional due diligence phase like Snow six months, a year down the road. So I think this one definitely has some potential.

JARED BLIKRE: Yeah, I was at the New York Stock Exchange when it listed for the first time. That was just as we were getting back there. So nice swag. Thank you to the people at FIGS there. And now we've got to tackle SoFi Technologies. This looks like this stock is in a trading range right now. So break this down for us, please.

KATHY DONNELLY: Yeah, you know, so this is a SPAC, right? So we don't have a lot of data. Are SPACs following the same patterns as IPOs? But I think this one is looking promising. It had an initial advance. We'll call it a SPAC advance phase, similar to the IPO advanced phase. And then it's kind of been going sideways.

And it's looking very positive here, like you mentioned, above the 10-week line. It would be nice to see it create a little tighter consolidation. And yeah, you've drawn it there perfectly. I mean, it could be soon breaking out into new highs past that turbulence zone. We'll see. SPACs are still a different animal. But I think this one has some potential.

JARED BLIKRE: A different animal indeed. Zack, we're going to leave it there, toss it back to you. And by the way, thank you for joining us today, Kathy Donnelly, co-author of "The Life Cycle Trade."

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