In his "Know Your IPO" segment of Mad Money Wednesday night, host Jim Cramer said we've returned to the part of the IPO cycle where investment bankers are luring us back to the market with well-priced deals. One recent IPO that caught Cramer's eye is insurance disruptor Lemonade (LMND) .
Lemonade came public two weeks ago at $29 a share and the shares currently trade above $74. Cramer said they have digitized the entire insurance process and sell policies and processes claims all online, often in seconds.
Lemonade currently focuses on just property and casualty insurance, however, if it decides to expand into other areas, like auto policies, its addressable market would be enormous.
Let's take a look at two charts to see if they give us any clues to work with.
In this daily Japanese candlestick chart of LMND, below, we can see two clues over the past nine sessions. First, we can see upper shadows above $85 and $90 telling us that in the very short-run, traders are rejecting these levels. A close above $90 would be positive.
The second item to point out is the large white candle on the first trading day. The middle of large white candles can act as support. The $60 area is about the middle of this candle and that should provide support if prices declined.
In the second Japanese candlestick chart of LMND, below, we used hourly price data. Candlesticks were not designed nor conceived to be used intraday back in the 1740's but today we have the computing power to look at them.
This chart only shows us a short-term trading range of $95 on the upside and the $70 on the downside. Prices will tend to trade in the direction of least resistance (floor traders used to say that prices trade to volume).
Bottom-line strategy: We do not have a lot of price action to work with but traders who are comfortable with IPOs could go long above $90, although they will need to set their own risk parameters. This one is not for the shy or timid or risk adverse.
