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Dow Jones Futures Active; Spotify, Netflix Of China, Dropbox In IPO Bases

Dow Jones futures rose slightly late Wednesday, along with Nasdaq 100 and S&P 500 futures. The Dow Jones, S&P 500 index and Nasdaq composite pulled back modestly Wednesday after the stock market confirmed an uptrend Tuesday. Meanwhile, Dropbox (DBX), Spotify (SPOT), Bilibili (BILI) and Baidu (BIDU) unit iQiyi (IQ), known as the Netflix (NFLX) of China, have formed IPO bases.

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Dropbox, Spotify, Bilibili and iQiyi all came public within the past month. All four have valuations above $1 billion, making them tech unicorns. The stocks have consolidated briefly, but their relative strength lines have been at or near record highs, signaling outperformance vs. the S&P 500.

While all four new listings are growing strongly, they are still unprofitable. You can find profitable IPOs, including hot Brazilian payments firm PagSeguro Digital (PAGS), on the IPO Leaders stock list.

Dow Jones Futures

Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures were up 0.2%. Nasdaq 100 futures climbed 0.25%. Keep in mind that overnight trading in Dow futures often doesn’t translate into how stocks will act in the following session.

Dropbox

The data storage provider came public at 21 a share, rising 36% to 28.47 in its March 23 debut. The stock hit a new high of 34.37 intraday on March 29. It’s consolidated since then. Dropbox popped 3.5% to 32.32 on the stock market today, a new closing high.

Spotify

Spotify technically wasn’t an IPO at all. The stock was a direct listing on April 3. The stock opened at 165.90 and hit 169 intraday before closing at 149.01. Shares fell 3.4% to 149.57 on news that top rival Apple (AAPL) Music hit 40 million subscribers.

iQiyi

Baidu’s majority-owned internet TV streaming unit priced at 18, but didn’t have a great debut on March 29. Shares rose to 18.52 intraday but closed at 15.55. But after a few days, iQiyi began turning higher. The stock rose 3.8% to 18.07, a new closing high.

While called the Netflix of China, iQiyi actually licenses Netflix content in China.

As for Netflix, it rose 1.9% to 303.67 on Wednesday in volume that was 29% above normal, continuing the stock’s rebound from the 50-day line. That action creates a new buying opportunity, but with Netflix reporting earnings on Monday investors should be wary. Netflix is an IBD Leaderboard stock.

Bilibili

Bilibili came public at 11.50 a share. The stock fell as low as 9.62 in its March 28 debut, closing at 11.24. Shares hit a record high of 11.80 intraday on March 29, as iQiyi debuted but reversed lower. Since then shares have consolidated in a smaller range. Bilibili dipped 0.2% to 11.48 on Wednesday.

The Chinese-based online company makes most of its money from mobile games. But it’s also positioning itself as a video-streaming firm like Alphabet (GOOGL)-unit YouTube, iQiyi or Netflix.

How To Trade IPOs

IPOs are important because they offer fast-growing companies, often with new ideas and markets. But investors should avoid buying an IPO on the first few days, because of the high risk that the stock will swing wildly. Let a stock shake out and form an IPO base or other bullish pattern. IPO bases can be extremely short, but breakouts from these patterns offer investors a chance to jump into a new stock with better odds of success.

IPO bases and breakouts can be wild, so be ready to cut losses quickly. Also be aware of the market environment. IPOs tend to be more volatile than the broader averages and even the typical growth stock. So if the S&P 500 and Dow Jones come under heavy pressure, there’s a high chance that recent IPOs will as well.

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