Nykaa IPO was priced at 1125 per share. (before it split from 1 to 6, and now adjusted price of IPO is 187. ) Post IPO it was bidded up to nearly 2500 (428 ajusted for split) and this fanfare lasted for only a few days (around 22 trading sessions) after which stock price broke its post IPO listing lows of 350 (marked in dotted red line) Since then the journey has been painful for those holding the shares.
The chart put below depicts typical story of a very fancied IPO carried to even fancier valuations by markets and gullible investors being trapped with silky stories. As mentioned above, post IPO, just within a few days, stock price broke below its post listing lows and started its downward journey.
One of the models one can use for stocks post listing is to watch out for post listing highs or lows being taken out. There are some examples of post IPO highs being taken out and stocks going on to become big winners before correcting. e.g Affle, Indiamart, are the immediate names that come to mind. Reverse logic can be applied to stocks breaking post listing lows.
After breaching 350, stock price formed a double top pattern at 315-320 and this pattern was confirmed on conclusive breach of 213. Double bottom pattern is marked in solid blue lines. Also note distribution for many trading sessions between two dotted blue lines. Price target for stock price following its double top confirmation would be around 110-115 depending upon which kind of chart we use. (bar chart or line chart etc). Current price is around 140 and there still does not seem to be any strengh in price.
IPO price of 187 is marked in dotted green lines.
One of the key lessons from this chart has been Peter Lynch’s lesson on “How low can this stock go” . It can go much lower than most people expect especially if numbers are not there to support the narrative Another one the famous learnings he imparted is full form of IPO… Its probably overpriced. It seems to be playing out here in Nykaa. (as also in a lot of other fancied IPOs that came in markets when markets and esp IPO markets were in party mode.
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