The IPO market is really beginning to catch fire with the tech industry partying like it’s 1999.  The party lights glowed and the DJ began spinning the beats before the LinkedIn (LNKD) IPO a couple weeks ago and the party will continue reaching a feverish pitch with a Groupon (GRPN) IPO.  I mentioned in my blog post about the LinkedIn IPO that others would soon follow (particularly Groupon, Facebook and possibly Twitter) on the heels of the massive success of LinkedIn and that appears to be happening.  Groupon announced today that it has filed for an IPO and hopes to raise $750 million.  If the LinkedIn deal is any indication, the Chicago based daily deal company could raise well north of $1 billion in an IPO.

Read Entire Post “Groupon (GRPN) Files For IPO As Another Tech Bubble Looms” Here

Ok, maybe the title hints that there is going to be some secret underground tactic for how to trade the LinkedIn (LNKD) IPO, but the truth is that my secret underground tactic works for all IPO’s! Ha!  It’s not the first time I’ve revealed my strategy for trading IPO’s, but considering the biggest IPO since Google began trading today (aka the Facebook of business networking), I thought it might be a good time to revisit the tactic.

When an IPO like this hits the market the knee jerk reaction is to want to jump in as soon as it begins trading for fear of missing out on the next big thing.  Taking a look at the open today with the stock more than doubling in price and surpassing $100, it definitely appears “the fear of missing out” trade is on big time!  Jumping in on that kind of trade can be a big mistake and can often lead to large losses. 

Before I get into the trading tactics let’s take a look at why LinkedIn (LNKD) is generating such buzz.  First of all, it’s the highest profile social networking site to hit the market which in all likelihood will have Facebook and Groupon wondering whether they should hit the public market sooner rather than later.  I’m sure investors and execs at both companies are seeing the dollar signs.  LinkedIn is no slouch in the social networking world, but is still dwarfed by Facebook in terms of number of users, revenue and profit. It’s dwarfed in terms of valuation too.  Based on the secondary market, Facebook has now reached a stratospheric valuation of around $70 billion while Groupon is being valued in the $15 – $20 billion range.  I believe at the current price, LinkedIn is approaching a $7 billion valuation.

LinkedIn counts just over 100 million users and doubled revenues in 2010 over 2009 to $243 million with a net income of $15.4 million. However, the company says it does not expect to be profitable on a GAAP basis for 2011 and is forecasting declining revenues and rising costs going forward (according to Reuters).  For comparison sake, Facebook has more than 600 million users and reportedly earned $1.2 billion in revenue and $355 million in net income for the first nine months of 2010.  Now you begin to see the kind of frenzy a Facebook IPO would generate if it were to go public too. 

Many are beginning to question LinkedIn’s valuation as murmurs of another tech bubble begin to grow.  Shares were priced at 17.5 times the company’s 2010 sales (that’s BEFORE today’s parabolic move).  That compares with Google’s valuation of about six times.  Is the move justified for a company that doesn’t expect GAAP profits this year or for a company that TheStreet.com says is becoming far less useful?  Common sense would say absolutely not, but then again any of us who have been involved in the markets for some time knows that common sense and reality are often two sides of the coin.  The “fear of missing out” trade can go on longer than we think.  Does that mean you should jump on the bandwagon?  In my humble opinion – NO.

That leads me to a discussion of how best to trade IPO’s, particularly an IPO that has soared out of the gates.  In a nutshell, the best strategy is to WAIT.  You want to see where this thing settles out, or more technically, where it forms its first base… a bullish triangle, a short base, a longer cup with handle or double bottom base.  The hottest IPO’s often don’t base very long, but in my experience it’s best to wait at least two weeks from the open to get a feel of where resistance and support may be.  After two weeks, I’ll revisit the LinkedIn IPO and post a chart with my analysis along with examples from the past.  Good trading out there and do not chase this IPO!

The following article courtesy of ForexTraders.com..

“Buy on the rumor, sell on the news” is an overused phrase in the investment community, but before an investor takes this advice to heart, he should also verify the sources and confirm the validity of the messages that he receives. This last part of prudent counsel often gets lost in the shuffle of buy and sell orders, but it may be the only protection that an investor has when it comes to detecting obvious stock manipulation techniques employed by those bent on deceit.

Stock manipulation is also a favorite topic of the “talking heads” on financial news channels. Fraud openly exists, despite the efforts of regulatory and law enforcement officials to stamp it out. A sad testimony to risk management efforts is that fraud can never be completely eliminated, but must be tolerated at an acceptable level as a cost of doing business. The forex market is, perhaps, the only market we have that is less prone to manipulative tactics due to its shear volume, now at $4 trillion a day and counting. Even the largest hedge funds with their sophisticated forex trading platforms or even central bankers are unable to artificially drive the market in one direction or another, though their efforts to do so are widely publicized.

Read Entire Post “Stock Manipulation Is Real, Types Of Scams” Here

According to the WSJ, investment bankers are beginning to discuss proposals with Groupon for an IPO.  Should Groupon go public this year it would likely be the most talked about IPO of the year (assuming Facebook holds off for another year).  Groupon already turned down a $6 billion offer from Google which in my opinion was a big mistake but some value the company now at $15 billion so what do I know.  It’s a great business model but with a low barrier to entry and I think Google will begin making a much bigger push in this space and have the infrastructure in place to do so.  The company was rumored to be looking at an IPO in the fall, but is now looking like it could happen within a couple months.  Considering the company just raised nearly $1 billion from big investors, there probably isn’t a need to rush an IPO, but at the same time the IPO environment is strong which may not be the case later this year.  Anyone smell a bubble?  Facebook $50 billion valuation, Groupon $15 billion, Twitter nearly $4 billion…

It’s been awhile since I provide an update on gold, so I thought now would be a good time to take another look at the yellow stuff.  In my last report on gold the GLD was inching closer to $130 and I thought that level would present a very difficult level and be an area where gold would stage a correction. 

A few things to point out.  For one, gold didn’t really correct, but rather digested overbought conditions with more of a sideways move (actually head and shoulders pattern) and remains in a fairly tight range above the $130 level, so certainly gold has held its own up here and could be poised for a move to the next major resistance level up around the $150 level (another 10% or so from current levels).

Read Entire Post “Gold Resting Before Push To 1500 Or About To Confirm Head & Shoulders Top?” Here

It’s been a terrific year for IPO’s here in 2010 with a surge in high quality companies coming to market.  A couple months ago I highlighted the Top 5 IPO’s, all of which are up significantly since being highlighted. I’ll probably do another Top 5 list in a month or so to include IPO’s since that report was written, but for now I wanted to highlight one IPO that I found to be very compelling – Sodastream (SODA).

Sodastream is an Israeli company that sells home carbonation and flavoring systems for.. you guessed it!  Homemade soda and sparkling water.  While I haven’t used the product myself, the idea is brilliant and rides the wave of three important trends – an increasing awareness of the need for better nutrition, a cleaner environment and saving money (in the long run).  Three simple, but powerful trends. 

Read Entire Post “Sodastream (SODA) Could Add A Pop To Your Portfolio” Here

Frederick Darren Berg, Seattle’s mini-Madoff, has now been formally charged in a massive Ponzi scheme according to the Seattle Times.  The founder of the failed Meridian Mortgage investment funds which drew nearly $350 million in investments, orchestrated yet another Ponzi scheme. He was charged today with money laundering and nine counts of wire fraud.  Prosecutors believe Berg defrauded investors in the mortgage funds out of nearly $100 million over the past 10 years by lying to investors about the health of the funds while financing a luxurious lifestyle that included yachts, private jets, a Mercer Island $8 million mansion and the funding of other business interests including luxury tour bus operator MTR.

Berg told investors in the largest group of Meridian funds their money would be used to buy properties, but it’s now clear that didn’t happen.  In order to fool the auditors, Berg apparently opened dozens of PO boxes which he listed as the addresses of fictitious borrowers allowing him to sign the confirmation letters sent from the auditors and send them back. 

Berg filed for personal bankruptcy back in July and has been cooperating.  While he hasn’t been jailed yet, hopefully he’ll be getting three squares at another big house soon.

Gold continues to run up nearly every day, enticing a growing number of johnny come lately’s to join the party.  You’ve seen the headlines.. Gold $2000, $4000/oz.  Could we see those kinds of numbers?  Maybe, but analysts that make those kinds of predictions are just looking to create publicity for themselves and publishers looking for a good headline. 

I like to take a different approach and analyze it from a supply/demand angle using technical analysis.  Late last year was my last detailed analysis of gold and I predicted that a top in gold could come at the 1200 – 1300 level.

“What I see happening is some kind of climactic run in gold over the course of a few months with  gains of 20 – 30%.  That’s not a number pulled out of a hat, but based on previous runs from previous bases.  Notice how the farther up you get into the rally, the returns diminish as the base quality deteriorates.  Take a look at any big move in a stock and you’ll see this similar pattern.  It’s reasonable to assume that the returns from this breakout will be less than what we saw with the 2007 breakout.. so somewhere around 20 – 30%.  If the price of gold gets into that 1200 – 1300/oz area I’d be looking for some major topping action!  A climax run in gold over the next few months followed by massive selling on the part of institutions may be the end of a nearly 10 year bull run in gold.” 

I expected gold would reach that level a bit earlier than it has, but we’re darn close to 1300 which happens to the next big level of resistance for gold and an area where a correction will likely take place.  It’s much too soon to call $1300 a major top in gold and we could certainly take out $1300 at some point, but now is no time to be adding to gold and for many not a bad place to take some profits off the table.

Here’s a look at the current chart of the SPDR Gold ETF (GLD).  Two important aspects of the chart to point out.  One is the fact that GLD is overbought on the weekly  chart once again.  Take a look and see what happened to GLD the last four times we hit overbought on the weekly chart.  The first time it led to a major correction of 30% in 2008 and three minor corrections since.  We’re overbought again up around the 1300 level and it’s not out of the realm of possibility to see another 30% correction to test the bottom of the channel around 95 – 100.  The second important component of this chart is that the 130 level coincides with resistance at the top of the channel (purple line)

===> You can get a free daily technical analysis of GLD here

Politics isn’t something I ordinarily get into on this blog, but couldn’t resist the gems that came from Obama’s mouth today.

“We also hoped for a chance to get beyond some of the old political divides – between Democrats and Republicans, Red states and Blue states – that had prevented us from making progress. Because although we are proud to be Democrats, we are prouder to be Americans – and we believed that no single party has a monopoly on wisdom.”

This gem of hypocrisy was stated early on today, right before he spent nearly an hour berating Republicans (John Boehner in particular) for the current mess we’re in.  So much for helping to close the divide. 

I nearly fell out of my chair today when I heard this statement:

“I have a different vision for the future. I’ve never believed that government has all the answers to our problems. I’ve never believed that government’s role is to create jobs or prosperity. I believe it’s the drive and ingenuity of our entrepreneurs, the skill and dedication of our workers, that has made us the wealthiest nation on Earth. I believe it’s the private sector that must be the main engine of our recovery.”

It doesn’t take long for him to contradict himself saying,  “We want to put more Americans back to work rebuilding America – our roads, railways, and runways.”

It gets better.. much better..

“I believe government should be lean, it should be efficient, and it should leave people free to make the choices they think are best for themselves and their families, so long as those choices don’t hurt others.”

Read Entire Post “Best Of Obama Speech Today: "Government Should Be Lean"” Here