The following case study has been published to explicitly outline the application of GANN methodologies to any IPO.
We have been actively studying the implications of GANN methods when applied to an IPO. We have studied 3 IPO's so far viz. Facebook.com, Twitter.com and Care.com and found the results to be more than 99% accurate. We have concluded that the method is perfect when applied to the opening prices and almost accurate when applied to highs and lows.
The report exclusively deals with the latest IPO of care.com, which started trading publicly on 24th Jan 2014. We have not used the data from our previous research on facebook and twitter IPO since the same has been outdated now and many people would doubt its authenticity.
The starting point of the research is the opening price of the IPO. We do not consider the issue price or the issue range, which is set before the launch.
Using the opening price, we calculate the different vibrations of the stock. We then plot the different angles, both up and down from the opening price. Further, we again plot different angles from the successive tops and bottoms. We have continued with the same process for 5 consecutive days and have been successful in picking both, tops and bottoms on an intra-day basis.
Please note that we have not used any third party software or any other form of technical analysis to present the case. All angles are hand plotted by manually calculating the vibration for each one.
DAY 1 - On the day of the IPO, after the issue has opened for public, we calculate and plot the angles from the opening price. We use smaller time frame charts (3 mins) to ascertain the effectiveness of the methods used. The following is a 3 min chart of the first day of trading.
At the end of the day, we presented the following conclusion for the next day "The prices have closed above 1*1 up angle for the day. Seems bullish for now." http://trivikramcap.blogspot.in/2014/01/crcm-carecom-ipo-charts-say-it-all.html
DAY 2 - On the second day, we had a gap up opening and had a run up to 1*2 up angle from the lows. This was the high for the day and soon the prices started dropping back towards the 1*1 base angle. But by mid day, the prices had broken below the base angle and we closed the day at the confluence of 1*8 up angle from the previous days' high and the 1*1 down angle from the highs.
At the end of the day, we presented the following conclusion "Looking forward, we expect the prices to consolidate tomo, since we have broken below the 1*1 up angle from the lows. However, the 1*8 up angle from the previous highs may be a good support. For a base case scenario, we recommend buying around 24.16-23.92, with a stop below 23.81 for a minimum target of 24.9 and above. On the other hand, we recommend selling around 26.37-26.60, with a stop above 26.75 for a target of 25 and below. Also, a break below 23.9 could open the gates for 21.90"
DAY 3 - On day 3, the prices cracked below the 1*8 angle but were well supported by the confluence of 1*2 up angle and 1*1 down angle after which the prices continued to consolidate above the 1*8 up angle.
At the end of the day, we presented the following conclusion for the next day " Looking forward, we expect the prices to resume the uptrend. We, recommend buying around 25-25.25, with a stop below 24.88 for a target of 25.92, 26.6. The prices may consolidate around 25.92 till mid-day before gaining momentum"
DAY 4 - On day 4, the prices opened at the 1*8 angle and we a saw rally up till 1*8 up angle from the highs. This happened within the first hour of trading and as such we posted the following live comment "LIVE UPDATE: A break above 27.2 could take the prices to around 28.5-28.7" We hit a high at 28.76 in the second half and the prices immediately came down to test the 1*8 down angle from the previous days' high.
We didn't present the conclusion for the next day.
DAY 5 - On day 5, we saw the prices resisting the higher angles. During the first half, the prices penetrated below the 1*8 down angle, but instantly jumped back to test the 1*8 down angle from the highs. By the second half, the prices were trading at the 1*2 down angle from the highs.
At the end of the day, we presented the following conclusion, "We have squared at yesterdays high, and are probably heading lower. This is because, we have strongly resisted the 1*8 down angle today at the highs. Looking for prices to stabilize around 26 tomo. Further, a break below 25.5 could take the prices lower to around 23.5."
- The prices display a strong affinity for the vibrations.
- The future price action can be well predicted using pure mathematics.
- The future high/low is dependent on the vibration set by the previous highs/lows.
- The effect of vibration set by every high/low is subjective to time.
- It is not necessary to combine the use of astrology with the law of vibration.
- The results are more accurate when applied to an IPO as compared to a listed asset since the time frame under consideration is very small.
It is evident that the price movement is a function of the vibration set by the previous highs/lows. When the vibration and its corresponding angles are known, it becomes very simple to eliminate the noise and focus on the price action. It provides a holistic picture of the probable future trend and its expected price action and as such helps us to initiate and manage low-risk and high-reward trades.
The most fascinating thing about applying the GANN methodologies to an IPO is that you can very well understand the future probabilities at a time when most of the big players are clueless regarding the trend. There are no fundamentals, no technicals. Its pure speculation.
To conclude, I would refer to a quote by Mr. W. D. GANN, "After exhaustive researches and investigations of the known sciences, I discovered that the law of vibration enabled me to accurately determine the exact points to which stocks or commodities should rise and fall within a given time. The working out of this law determines the cause and predicts the effect long before the street is aware either."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.