Going against the grain in the markets can be dangerous. If your conviction is executed with a favorable risk-reward ratio, it can be very rewarding.

Our co-host Denis Dick and producer Spencer Israel found a silver lining in Robinhood Markets Inc. (NASDAQ: HOOD) — despite its fourth quarter report — on Friday’s show, making it today’s pre-market readiness stock.

Robinhood Pop and Drop: After ending its inaugural trading session on July 29 at $34.83, the issue hit a double bottom in the $33.80 area and embarked on a dramatic rally. Once the show passed its session high ($40.25) on August 3, it more than doubled when it peaked on August 4 at $85 and posted its all-time closing high that day at $70.39.

Sold to you: Ahead of the August 5 open, in what could turn out to be the biggest inside sale of all time, Robinhood filed with the SEC a preliminary prospectus on Form S-1 to offer up to $97.876 million. Class A common stock.

These shares were offered by selling shareholders following the automatic conversion of certain convertible bonds held by selling shareholders in connection with the initial public offering.

During this session, the issue fell from $70.39 to $50.97.

The Robinhood Dead Cat Rebound: The issue bounced around the $60 area over the next few days but could not hold. Once it finally broke through the $50 level on August 18, the slow southerly roll was on.

When the initial IPO low was breached in mid-November, the pace of decline accelerated.
The year-end tax sale drove it lower and lower, and when the “January effect” failed to materialize, there was a parade of sellers. On Thursday, the show posted its all-time low at $11.61.

Robinhood Q4, pre-market take: After Thursday’s close, the company reported quarterly losses of 49 cents per share, which missed analysts’ consensus estimate of a 45-cent loss. The company reported quarterly sales of $363 million, which beat analysts’ consensus estimate of $362.14 million.

Dick and Israel were adamant that the Robinhood company would eventually have a low enough price point to become a viable take-out candidate. Of course, it was difficult to determine if, when or what price could occur.

Their thesis was that the company built a young customer base that would accumulate money to invest over time.

The author of this article was not so convinced, but noted that the premarket action indicated one or more strong buyers in the $10 area.

The full discussion on the issue from Friday’s show can be found here:HOOD Price Action Off The Open: The show opened just under $10 and immediately bottomed out at $9.94 and embarked on a massive rally.

As of 1:15 PM EST, it had broken through Thursday’s high ($12.66), reaching $12.85, and has now retreated to the $12.50 area. If the rally continues, there is a pair of daily highs from Tuesday and Wednesday in the $13.50 area.

The stock eventually closed 9.65% higher at $12.73.

Photo courtesy of Robinhood.