Trading on OVERSOLD growth names (NFLX, DOCU, ROKU, TWTR)
Before we continue into the blog, let me preface this by saying that in our 2022 Market Outlook at the beginning of the year, we said that:
1H22 will be "weak and whippy"
2H22 will be better.
Value stocks and defensive stocks will be favored compared to growth, especially in 1H22.
Having value and defensive stocks while keeping powder for trading dips will likely outperform the market.
So far, so good. I think our course members (who become insiders to this group) have done relatively well for those that followed our outlook.
Also we have been shunning growth names with low or no earnings, there comes a time when sentiment is too extreme, and some of these growth names can look oversold.
Playing the probability of a retracement from oversold conditions can get some rewards if correct.
Since we recommended having some powder dry to play dips, now is one of those times! Note that we are not intermediate bullish on growth stocks yet, so we tend to think of this as retracement plays in an intermediate downtrend.
Being that I started off as a short term, risky trader, I want to share how I used to think almost a decade earlier.
For the following ideas, note:
These are short term and risky.
These are contrarian ideas in a downtrend based on the move being so oversold that a retracement is highly probably, especially on short covering.
In a rising interest rate environment, companies with little to no earnings are not favored long term. Hence, trades will be short term, based on a potential change of sentiment.
These slides are for educational purposes only to have an appreciation of technical analysis, to show you how short-term traders might view them.
Risk management is key. A trading position is usually less than 5% of portfolio. One must be willing to cut loss if wrong.
These ideas are not considering the stock’s fundamentals. Long term investors should ignore these slides.
ALL of them have a cut-loss and price target objective that must be followed to prevent big losses.
Hey guys, to all those short-term traders of those that want to know how short-term traders think.
Here are a couple of ideas in the PDF attached based on playing oversold conditions in certain growth names. Remember that a rising interest rate environment pressures growth stocks with high debt and low or no earnings, however, sometimes, it gets so oversold that any short covering can give a good retracement. Inside here are NETFLIX, DOCU, ROKU and TWITTER and a couple to KIV.
To know how to look for more of these short-term trade ideas, check out session 4 of the QuantZombie Investment Analysis++ course. https://www.quantzombie.com/qz-investment-analysis-class
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