Why Not Buy the Dips?

Every so often we get a question asking why we do not»buy the dips» more when we’re taking a look at potential stock plays and the answer is actually simple. It is not»our» style. That is not to say it is wrong, or that you should not do it, we just don’t find it works as well for us.

Allow me to explain. In the realm of trading you will find a zillion styles. Some ride endings, some speculate in basics, some are pure daytrades while others are swing traders. Some play with the technicals, some play buybacks. Some play splits. Some play the market «versus» the bond pits. We have a tendency to play sector strength and individual breakout/breakdowns.

There’s a whole lot of money to be made on 3,5, and 8 day modification routines. Watch the charts and you’ll see that stocks frequently reverse on these days, so buying in and grabbing the bounce works for lots of men and women. Just because we do not concentrate on such a strategy does not make it wrong, it is just not»us». We like to search for break out or break down patterns, and attempt to connect them to complete market directions.

Suppose you have a feeble looking stock that’s just barely hanging on support.If the general market puts in a massive day, odds are that stock won’t violate it is support and collapse. But on the other hand, if you find that weak pattern and then the market has a bad hair day, chances are pretty good it is going to roll over and fall pretty hard. Thus, we brief it. On the side the concept works the exact same way. Find a stock looking to break out and pair it with a dip or climbing market. It will often make it.

So, we do not have anything against operating reversals, buying dips, etc.. It’s just not our style, and lets face reality, some people do some things better than others. We are not great at choosing reversals, but we’re fairly good at breakout/breakdowns. If you end up getting good at choosing reversal plays, by all means go for it people. In actuality, take us a note and let us know how you are doing!

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