I'm Looking For 2nd Entries Into These 2 IPOs Today

Editor's Note: This column was written late Thursday afternoon to prepare daytraders for Friday's trading.

This past week has brought 10 IPOs to the market. These IPO’s have raised over a billion dollars, so they are not small, unknown companies.

On Thursday, two IPOs presented some excellent trading opportunities. Refco (RFX | Quote | Chart | News | PowerRating) presented a great opportunity to trade after its open. The stock opened at $26.25, substantially higher then the initial estimated price range of $19 to $21. Due to the large number of bids in NYSE open book and the indicated NYSE specialist’s quote, I immediately went long for an initial profit. There were a number of times I added to the position in the first 20 minutes of trading. These points were 26.50, 27.00, 27.50, and 28.00. Although I lost .20 cents on my last position I took a nice profit on the entire trade.

Heartland Payment Systems (HPY | Quote | Chart | News | PowerRating) traded in a similar manner. The company’s initial public offering was priced at $14 to $18 per share. HPY began trading at $22.50. Watching the tape, I realized that HPY was not selling off and there were a number of buyers on the bid side of the NYSE openbook. My first trade in HPY was a profitable scalp for 40 cents per share. HPY came up on my alert window around an hour later as a return to the day’s high. I went long again as the stock advanced through $24. The stock went as high as $24.75. I took profits as the price fell back to $24.50 at the end of the day. Although there were a number of short sale opportunities in RFX and HPY, you have to remember that it is illegal to sell short IPOs.

Since HPY and RFX were so strong today, I will be looking for a return to the highs for both of these issues in the next few days. I also have McDonald's (MCD | Quote | Chart | News | PowerRating) on my watch list as it climbed all day long after breaking a previous day high and resistance at 33.00. MCD closed strongly at 34.70 which was .14 higher then its 52 week high set on March 7, 2005. Another stock to watch on Friday is GATX (GMT | Quote | Chart | News | PowerRating). On Thursday, this stock closed near its high on 6 times its average daily volume.

Mike Kestler

Michael Kestler is a full-time professional trader and managing partner for Evolution Capital LLC., a proprietary trading firm. Mr. Kestler specializes in intraday trading of NYSE listed stocks. Before founding Evolution Capital LLC., Michael began his career on the floor of the CBOE. Mr. Kestler was previously a Mid-Cap and Nasdaq Market Maker.