As you may have heard, the IPO market is heating up. Here’s a way to play with it. There have been 31 so far in 2024, which is 25% more than in 2023 at this time of year, according to Stockanalysis.com. While no one expects 2021’s annual record of 1,035 to be challenged, there are potentially many more IPOs scheduled in the next 10 months. But what about stocks that have received initial public offerings in recent years? There are several ETFs that hold recent IPOs, including Renaissance Capital Greenwich Funds’ Renaissance IPO ETF (IPO). According to Renaissance, the ETF adds new issues and eliminates old ones three years after their IPO. Therefore, the holdings that drive ETF performance have a high probability of being different from quarter to quarter and especially from year to year. Currently, the ETF holds 59 stocks, of which financials (30%) and technology (29%) have the largest presence by a good margin. Breaking Out We write about it here because its chart presents an interesting technical pattern. In recent weeks, the ETF has tested a major resistance level near $38. If the IPO were to remain above this breakout zone, the upside target would be $52, as illustrated in the chart. The 200-day moving average is the most popular long-term moving average and one of the best long-term trend indicators. Not surprisingly, the fund’s worst run in recent years occurred when it traded on a downward-sloping 200-day line through 2022. The 200-day line flattened last year and has gradually sloped ever since. upward. The IPO ETF bounced off the line last fall and has remained above it through the first two months of 2024. Seeing the IPO stay above the upward-sloping 200-day moving average is the best-case scenario. Relative Strength The IPO has experienced five distinct trading environments since the COVID lows. Two uptrends (blue), one downtrend (red), and two times the ETF moved sideways. During the uptrend from 2020 to early 2021, the ETF’s weekly RSI has fluctuated between overbought territory and the midpoint (near 50). The indicator did the opposite from the end of 2021 to 2022. And in the meantime, the RSI stabilized. As is clear, the indicator once again traded between the overbought levels and the midpoint. As long as this persists, the IPO outlook will remain bullish. Two IPO Holdings Investors should be aware that the IPO ETF is not very liquid, meaning its average daily volume is not robust. The good news is that many of its components are much more liquid. Below are two names that sport multi-year construction technical patterns that are worth looking into. One is a financial stock, Ryan Specialty Holdings (RYAN), which just reported earnings, and the other is a tech name, Squarespace (SQSP). -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE SECURITIES OR OTHER FINANCIAL ASSETS. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF ANY INDIVIDUAL. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD CONSIDER SEEKING ADVICE FROM YOUR FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.