'Buying the dip' isn't easy when you don't know where the bottom is
"Buying the dip" is something knowledgeable investors do to grab stocks when the market is down, with the intention of selling when the market recovers. But while it sounds simple, it requires a good sense of timing and what we might call depth perception.
In other words, you need to know when a particular stock is dead or just ailing. Too often, what Wall Streeters call "retail investors" -- y'know mom-and-pop types -- tend to buy stocks that are somewhat cheaper but still overvalued and likely to continue going down.
Then, as the stock continues its descent, they pile on and buy some more, not wanting to lose their initial investment. This is basically like the occasional gambler who just can't walk away from the table even though they're losing consistently, fervently chasing the belief that things are bound to get better.
This is pretty much where experts say the market is right now. Individual traders pumped more than $12 billion into U.S. equities last week, more than the weekly average for the last 12 months.
This suggests to the eagle-eyed institutional investors that the market hasn't hit bottom yet and they are sitting on cash or alternative investments until it looks safe to get back into the water.
Emma Wu, a JPMorgan Chase & Co. analyst, estimates those retail investors are looking at a 7% loss so far this year, not exactly an ideal outcome. Will it come back?
Tesla in free fall
Nowhere is this more evidentthan in Tesla stock. Individual investors have been net buyers of Tesla stock for 13 straight sessions, pumping $8 billion into the stock, Wu said. That's the biggest inflow in an individual stock since 2015, according to Bloomberg.
What's odd about this is that Tesla's share price has fallen 17% overthis time, wiping out more than $155 billion of market value.
Tesla shares have been in decline since mid-December, when the excitement surrounding Donald Trump's victory began wearing off and Tesla founder Elon Musk began playing aprominent role in the Trump White House.
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Posted: 2025-03-21 18:36:44
