Why ‘buying the dip’ can signal market confidence

In this episode of Stocks in Translation, IG North America CEO JJ Kinahan, joins Markets and Data Editor Jared Blikre and Producer Sydnee Fried to discuss the phrase, “buy the dip,” and how it relates to market sentiment.

Blikre explains, “‘Buying the dip’ is a strategy of purchasing an asset after its price has dropped, believing it is going to go higher.”

Kinahan considers the phrase to be a market sentiment indicator. “When people think that some trouble in the market is temporary, if you see more people ‘buying the dip,’ I think what they’re really saying is we have confidence in the market overall. Longer term we have confidence that we’re going to see the bounce back.”

Kinahan uses Microsoft (MSFT) as a good example of a company leading the way in the ‘buy the dip’ mentality.

“It’s the first place people tend to turn in terms of individual names,” Kinahan explains. “We used to see Apple (AAPL) be a stock that people also turned to pretty quickly. Not seeing that as much recently. Meta (META) taking the place a little bit, but at the end of the day it tends to start with Microsoft from the retail perspective.”

Kinahan also talks strategy with Blikre and Fried and the importance of setting a plan and managing expectations while trading.

“People may have a plan until the market moves against them,” Kinahan says. “There are some trades I may make that may be for a very short amount of time, a couple of hours, day or two. There are other trades I’m making where I’m saying, ‘Okay, this is a 60 day trade, this is a one-year trade. It’s something I want to invest in for a longer period of time.’ - I think the biggest mistake too many people make is they are not sure what their investing timeline is.”

Find this episode's transcripts and more episodes of Stocks in Translation at https://finance.yahoo.com/videos/series/stocks-in-translation/

Thoughts? Questions? Fan mail? Email us at yfpodcasts@yahooinc.com

Yahoo Finance's Stocks in Translation is hosted by Jared Blikre and Sydnee Fried, and produced by Lauren Pokedoff.

Learn more about your ad choices. Visit megaphone.fm/adchoices