Chapter 11

Equities

Throughout this book, I have presented numerous methods and strategies designed to decode the market puzzle. My experience suggests that these techniques can be applied to all markets equally well. Whether your specific interest lies in the area of cash currency, commodity, fixed income, or stock trading, the applications and the results should be comparable. Because of the variations in market composition, however, composite indexes may vary from one market to another. In this chapter, I intend to highlight various trading strategies I have created and have applied to both individual stocks and the stock market.

New Issues—Initial Public Offerings

For many years, I have observed a similar trading pattern for most newly issued stocks. I have been particularly sensitive to the trading activity of these new issues because I was in charge of trading these stocks when I first entered the investment business over 23 years ago. Although nothing in the investment business is for certain, and most techniques, following a period during which they work exceptionally well, undergo a period of erosion and disinterest, this method seems to have successfully withstood the rigors of various market environments and of time. Whether the climate for public offerings is hot or cold, this technique on balance seems to work, although the degree of success seems to be influenced somewhat by the overall market.

Typically, once a new issue begins to trade, I look for the following ...

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