There's no denying that Wednesday was a horrible day, Jim Cramer told viewers during his "Mad Money" program, but that doesn't mean there isn't a silver lining. Stocks do get cheaper as they go lower and that certainly has been the case with two recent initial public offerings (IPOs), Revolve Group Inc. (RVLV) and The RealReal Inc. (REAL) .
Revolve is an online retailer aiming to turn fashion into science. The company operates three online stores and introduces thousands of new styles, doubling down only on the ones that are working. Shares debuted at $18 and immediately shot up to $34 on their first day of trading. Prices have fallen from $48, but at $22 a share now, their lowest level since the IPO, Cramer said he's a buyer. Let's look at two charts.
In this daily bar chart of RVLV, below, we can see that prices are below the declining 20-day moving average line. The daily On-Balance-Volume (OBV) line is pointed down and the 12-day price momentum study is showing an uptick here on Thursday, which could become a slowing in the decline. If today becomes an "inside day" we may have the start of a low.
In this Point and Figure chart of RVLV, below, we get another view of the recent decline. I need to see some stabilization and accumulation to get attracted to a stock.
The same with The RealReal, an online consignment shop that saw its shares fall sharply last Friday. Investors looking for a good entry point into this stock just got one, according to Cramer.
In this daily bar chart of REAL, below, we can see a large outside day with heavy volume on Wednesday. The OBV line is pointed down but may be turning flat. The momentum study shows a shorter bar here on Thursday, which if the inside day holds could become a low.
Bottom line strategy: Regular readers of Kamich's Korner know by now that I find IPOs difficult to properly analyze because of the lack of trading history, but as soon as you can see a higher low on the charts aggressive traders can probe the long side because they then can use the first low as a stop-out level.