My Next Move in Apple, Netflix & Meta Dip Trades
It's looking pretty volatile out there, so do we hold, sell, or a little bit of both?
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It can be hard to buy into a selloff. Watching every stock on your screen turn red, and then buying, can take nerves of steel. We never know how deep of a decline will occur.
The best way to take advantage of a selloff is to plan your moves beforehand, and then stick to the plan.
Last week, we laid out our game plan for a test of the Nasdaq Composite’s 200-day moving average. We named three stocks to buy - Netflix NFLX, Meta Platforms META, and Apple AAPL - on a test of that moving average.
We never assumed that the Nasdaq Composite was going to reach that indicator. Instead, we waited to see if the price tested the indicator before taking action.
That test finally occurred on Tuesday, when the Nasdaq Composite closed below its 200-day moving average. In the process, the tech-heavy index formed a hammer pattern (arrow).
The hammer is a candlestick reversal pattern. In this case, the hammer led to a reversal back above the 200-day moving average (red). Two of the three stocks named above also reversed course, as anticipated.
Netflix tested (arrow) its 50-day moving average (blue) on Tuesday. Thanks to the Nasdaq’s rebound, the streaming giant’s stock soared 47 points from Tuesday’s low to Wednesday’s high. During that process, Netflix never fell below its 50-day moving average, an indication that this stock is considerably stronger than the overall market.
On Tuesday, Meta Platforms closed below its 50-day moving average (blue) for the first time this year. Then, the stock shot higher as the Nasdaq gained strength. From Tuesday’s low (arrow) to Wednesday’s high, Meta jumped by $36 per share.
Only Apple failed to cooperate. Tuesday’s low of $234 (arrow) led to Wednesday’s high of just $236. Shares of Apple fell to $229 before that rebound occurred.
Now that we’re long Netflix, Meta Platforms, and Apple for a trade, what’s our next move?
First, let’s differentiate between trades and investments. I’m already long Apple as an investment, and I might never sell it, but that’s separate from this discussion. It’s possible to own a stock for the long run, and to buy it for a short term trade.
Regarding the short-term trades for Netflix, Meta, and Apple, I’m closing half of each of these positions. This market is entirely too volatile to risk giving back these quick gains.
For now, I’ll keep half of each position in case further gains materialize, with the intention of selling into strength down the road. If any one of these three stocks pulls back to Tuesday’s low, the remainder of that position will be closed.
At the time of publication, Ponsi was long AAPL, META, NFLX.
