Hi everyone,
If there’s one thing I focus on as a trader, it’s the trend. And over the last few days, I’ve seen a lot of FOMO as beaten-down stocks bounced sharply.
It’s tempting to chase a stock when it gaps up 10% or 20% overnight. But a big bounce doesn’t automatically change the bigger picture. Many of these names are still in strong downtrends, which means buying them is a countertrend trade. You might catch a rally, but you’re swimming against the current, just as you would be if you were shorting a strong uptrend.
That’s why the trend indicators in the TMAD app are so useful. For each stock, you can see whether the trend is bullish, bearish, or neutral before deciding how to trade it.
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For trading purposes, I generally prefer buying a pullback in a bullish trend, ideally when a stock dips toward a relevant moving average or retests a pivot level. In a Stage 2 uptrend, buyers have already shown interest in supporting the stock. That doesn’t guarantee the dip will be bought again, but it gives us a different setup from buying a bounce in a Stage 4 downtrend, where the dip can keep dipping.
Be careful with the strongest bounces
We’re seeing this across AI, memory, and neocloud names. These stocks can rally sharply into resistance, only to reverse hard when negative news hits. Momentum works in both directions, so don’t let a green day make you forget the underlying trend.
Of course, buying when everyone is fearful can create great opportunities. But price alone isn’t enough. We also need to look at valuation, and some neocloud names still look expensive to me after trading on a lot of euphoria. I’m happy to be patient rather than chase every bounce. Let the dust settle, we have NVDA affairs, potentional 50bps rate hike, higher inflation, oil is pointing up again and dollar keep grinding higher.
I’m still 60% cash and didn’t allocate into any long term names. But there are some I might be buying next days. Let’s look into them.
