Print the page
Increase font size

Posted March 10, 2021

Ray Blanco

By Ray Blanco

Buy the Damn Dip

Buy the dip? Or sell this rip?

After three straight weeks of selling, investors have been understandably feeling anxious.

Tech stocks have been gut-punched since the middle of February. All told, the big, tech-heavy Nasdaq Composite Index was down more than 10.5% heading into the start of this week.

Is the bounce we're seeing this week a sign that the bottom is in for tech stocks? Or is it just a short reprieve before the next wave of selling?

Here's the good news the data point to more upside ahead for the tech sector.

And that means with many formerly hot momentum stocks meaningfully lower than they were just a month ago, now could be a major opportunity to buy the dip.

First off, double-digit declines in the Nasdaq are actually pretty rare. Since the Nasdaq Composite Index launched back in 1971, we've seen 26 instances where the index sold off 10% or more. And historically, those dips have been spectacular buying opportunities.

On average, the Nasdaq Composite winds up 17.9% higher 180 trading sessions after crossing the 10% drawdown point.

Here's what that looks like on a chart:

On average the Nasdaq Composite has returned 13.2% annually since inception. But folks who bought during double-digit drawdowns have seen double that annualized return.

Of course, there are exceptions. There are no guarantees in the stock market, after all.

Years like 1987 and 2000 (when the tech bubble peaked) came with some pretty nasty follow-up performance. But by and large, those are outliers. As long as you don't think we're in that sort of cataclysmic market scenario, it makes sense to be a buyer here.

On balance, even accounting for the worst years, the strategy of buying the Nasdaq during 10% drawdowns and holding for the next year has been a major net winner.

There are a couple of important takeaways from the performance chart above.

First, it takes a little while for stocks to find their footing following a 10% drop in the Nasdaq. Typically, the index has retested those lows before kicking off its big rally. That means we could see a few more weeks of churn before Mr. Market starts to show a stronger buy signal.

Second, from about the 50-day mark, the uptrend has tended to be pretty incredible. That bodes well for a mid-second-quarter rally in the tech sector.

To paraphrase Mark Twain, history doesn't repeat, but it rhymes. Oh boy, does it ever rhyme.

And right now, the data point to a solid rebound for tech stocks.

Sincerely,

Jonas Elmerraji, CMT

BUY ALERT: Why This COVID Vaccine Maker’s Stock Could Soar 50%

BUY ALERT: Why This COVID Vaccine Maker’s Stock Could Soar 50%

Posted July 22, 2021

By Jonathan Rodriguez

Alright, alright! I'm J-Rod and welcome to Stocks that Rock. Each week, I turn up the volume on a breakout stock that will rock your retirement account. Today, I'm going to reveal my...
The Truth Behind Bitcoin’s Bounce Today

The Truth Behind Bitcoin’s Bounce Today

Posted July 21, 2021

By Jonas Elmerraji

For the past few weeks, we’ve been watching the story unfold in the world’s biggest cryptocurrency. And it begs the question: Is it finally curtains for Bitcoin?
Just a Billionaire’s Joyride

Just a Billionaire’s Joyride

Posted July 20, 2021

By Ray Blanco

This morning, Jeff Bezos and his team successfully performed a suborbital flight with Bezos in tow. But was it just a billionaire’s joyride? Or is there something more to it…
The Billionaire Space Race Heats Up

The Billionaire Space Race Heats Up

Posted July 19, 2021

By Ray Blanco

Markets are giving back more and more gains recently as we head further into the summer doldrums. But all the while, we’re seeing some amazing things come out of the tech world… including major advances in many different sectors
The Three Lessons I Learned From My Biggest Loss Ever

The Three Lessons I Learned From My Biggest Loss Ever

Posted July 15, 2021

By Jonathan Rodriguez

J-Rod shares three lessons he learned from the biggest trading loss of his career.
Mining Bitcoin With Equipment From the 1800s!?

Mining Bitcoin With Equipment From the 1800s!?

Posted July 14, 2021

By Ray Blanco

Can you mine Bitcoin with equipment built in the 1800s? It turns out the answer is yes.