Should I Buy Stocks Now | Podcast Episode #87

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market and I’m ready to show you how?

0:29
Hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market and you know, typically I talk about more like strategy based best ideas and approaches to trading the stock market, how to make yourself a better Trader. I try to lay off less about the current events my podcast and use that more on my website and with the trading block and so forth.

0:47
But we’re an unusual times right now. We’re in some crazy times in the stock market, we have a pandemic with the coronavirus, which everybody knows about that by now everybody it’s affecting every country pretty much. I think 172 countries are now infected with the virus.

1:06
We have about 55,000 alone here in the United States and I think worldwide, it’s over 400,000, it’s pretty crazy. And those numbers are probably only keep going up. Now, as it pertains to the podcast, we got a stock market that is down 30%.

1:24
Now, we had a, we had a rally yesterday and that that brought us off of that 30% down. However, the market is still in a dire situation, we’re not going to recover from this overnight. It’s not going to be a v-shaped bottom and all of a sudden, you know, a couple weeks later, we’re going to be sitting right back at the all-time highs.

1:40
Again, there’s no chance. This is one of the most difficult markets that you will ever trade. Does it mean you get completely out and Ignore the market and never trade again. No, man, you got to stay in this. I’m not saying stay in from a go, 100% long or go, 100% sure. I’m not saying that at all. What I’m trying to say is that you keep your attention on the markets, you keep focusing on it, you keep learning from it.

2:00
And so today, using this podcast, I want to address the markets, I want to talk about them. And, in this particular episode, should you be buying? Should I be buying? Should anybody be buying? And what are the risks that come along with that head? I had a friend come over, and he was all excited.

2:17
I did last night and he said, hey, I just opened up a Robin Hood up. That’s what a lot of people are opening right now. Are the Robin Hood apps? Especially if you’re new to train. Because that’s probably what you’ve heard. I’m not a huge fan of Robin Hood. I like the thinkorswim platform better. They all have their pros and cons obviously, but I like the thinkorswim.

2:35
One by TD Ameritrade that is not a paid promotion. By the way, they do not pay me for saying that. I’m just here to tell you what, what, I like in the in terms of trading. So I don’t get any Kickback or anything off of that. But any case I hear somebody say, I got into an apple and I bought some Boeing and stuff like that and you know what they bought when the market rally like 11% gives them a huge false sense of what the market is all.

2:59
Actually about you get a 13 or 11 percent move in the Dow and it’s the biggest one since like what 1933. So it’s like 100 Year event. Yeah, you’re not going to be making that kind of money all the time, when the markets go back to normalcy and there will be, there will be a time where things go back to normal where that price point is, I don’t know but there will be a time and then you’re gonna be like oh man markets only move like sometimes three or four points in a day on the S&P 500 I’m like yeah man so it’s going to be a little bit of a shock or so.

3:29
People are getting in because they’ve heard all these Warren Buffett quotes all their times. Like, by when everyone else is fearful, well people been fearful for a while and the market continues to drop. People were fearful in Boeing when it was at 220 and we’re going to talk about that a little bit later in this podcast, and, you know, it went down as low as like, $89 this week.

3:45
So just because you’re buying when other people are fearful does not mean you’re making a good buy. And so my friend comes over, I think he bought like I don’t know like a thousand dollars worth of Apple and he probably made like a hundred bucks or something off of it. Good for him, man, I’m happy for him. But one of the things that I like to do a lot of times is that my experience with the market is that most time the bottom doesn’t come until everybody’s been demoralized and just you know, completely scared to death like they don’t even want to open up a Robin Hood account.

4:12
They don’t even want to consider the idea of getting into the stock market ever again, that’s usually when the bottom comes. And so I still see a lot of people flowing in. It’s like yeah, man. I’m gonna, I’m gonna get long, never traded before, but I heard this is a good opportunity because stocks are so low. Market usually still doesn’t reward that kind of behavior. It seems right, it feels right, it looks right, but still usually get killed for it.

4:30
So a market, typically you know you’ll like see like a 5% 10% pullback. And that’s usually pretty extreme. December 2018 I think it was like a 20% pullback from the highs to lows, bounced back fairly quickly. When you look back on it throughout history I mean we went right back up, not instantaneously but you know over the course of the next year it did and set new all-time highs. And it was a pretty good market for 2019 and in 2018 case itself and over a three-month period, 20% down off of the all-time highs.

5:09
What did we do here is like less than a month. We’re like down 30%. I mean, this is extreme. I think I talked about it in the previous podcast. It took like 42 days for the S&P 500 during the Great Depression to drop like 20%. We did that in like 16 days.

5:26
So yes, we’re talking about situations here that go beyond like the dot-com, even though dot-com was pretty bad. And 2008 was really bad. We’re also talking about not only those periods, but we’re talking about the Great Depression now too, because there’s a lot of similarities in all these events. You’re in. It’s getting pretty fearful for a lot of investors out there.

5:44
Everyone’s hope is that Tuesday was the market bottom. Usually doesn’t happen that way because right now what we’re seeing is a collapse. We’re seeing a collapse like what we saw in 2008 with Lehman Brothers and Bear Stearns. We’re seeing that with the dot-com bubble bursting where the NASDAQ gave up like 87% of its profits from the all-time highs.

6:03
It took 15 years for the NASDAQ to come back. You’re seeing things that threaten the integrity of the financial system because in this particular case, it’s not a couple of rogue actors that are screwing things up for everybody else. We’re shutting down an entire global economy and that’s going to have an impact on every stock out there pretty much except for the ones like we’ll talk about these a little bit later too, but like Clorox and Kroger and Zoom. They’re going to benefit because they have technologies and they have products that people need during these times.

6:34
So now we have the Senate passing the stimulus bill, they’ve reached an agreement. It’s going to go through the House. Markets rallying, everybody’s happy. People are going to get, you know, free money from the government. I guess that, you know, politically I’m not going to try and get into that. I’m just going to talk about the facts about what is actually going on there. I don’t care to alienate my audience over such a serious topic right now and that is, you know, the stock market crashing. So I’ll just stick to the facts on it.

6:51
With the stimulus bill people are going to be getting money. It’s going to help out some families that really need it a lot. Obviously you’re going to see some bailouts with like Boeing, with some of the airliners and the cruise lines. There’s going to be some money flowing around. I think you’re going to see things like the buybacks get addressed because a lot of these companies weren’t able to address these huge problems because they had been buying back so much of their stock over the years, but then on the other hand, the buybacks did propel the market.

7:29
Over the last 12 years to a great extent. What the stock market would look like today without the buybacks, who knows? It’d be far less than where it’s at right now though. So the market is baking in a lot of this news here. There’s a lot of feel-good stuff. Market is extremely, extremely oversold.

7:53
So by historical proportion, it’s one of the top three most oversold markets of all time. And it did it within a month’s time fastest oversold market I’ve ever seen to these kinds of extremes. Crazy.

8:09
So yeah, you take somebody like myself. I’ve been doing this for almost 30 years. I’ve been doing it like when I was 11 years old, I got into the stock market and I took an active interest in it trading, all that stuff. Investing, I’ve been doing it ever since. I’ve seen a lot, experienced a lot in the stock market. This is one of the most frightening things just from an observation standpoint that I’ve ever seen. Not because I’m losing money. I’m still up on the year, guys, still up, still making money on the year.

8:26
Why is that? Because I manage the risk. We’ll talk about that a little bit too. I don’t know how long this podcast is going to be. I’m not going to try to make it too long, but there’s a lot to talk about. So we’re baking in the news, markets are going up, they like the stimulus, they like there’s some help. Trump also said hey, I want to jumpstart this economy by mid-April. Markets kind of like that because that means some earnings can start coming in.

8:47
Does that mean the market’s all of a sudden going to go right back up to 100% capacity? No. You’re going to still have governors that probably shut down their own states and everything else. Probably a lot of politics there. But what does that set up for? It sets up for a dead cat bounce. Are we guaranteed that this will be a dead cat bounce? No. Is it likely?

9:02
Yes. Okay, there’s no guarantees in the market. You could have a v-shaped bottom, we could go straight back up to all-time highs over the course of this year. There’s no guarantees that it will happen, and there’s no guarantees that it won’t happen. Okay. Same thing with the dead cat bounce. Maybe a dead cat bounce, but it may not be. But we’re trading in likelihoods.

9:21
What is the likelihood? It means that this is probably a dead cat bounce. I talked about how a lot of new traders are getting into the fold here, they’re excited. They think they’re buying some stocks at some great prices and they very well may be, but the market likes to make fools of everybody. You go back to the old 1980s game called WarGames.

9:40
It was starring Matthew Broderick. There was a point at the end and there was the whole thing about nuclear warfare, right? And this computer was like simulating it. But people were actually thinking that it was a real scenario world governments were thinking that it was somehow a real scenario. So at the very end, the only winning move is not to play. And in this stock market there’s going to be a lot of people wanting to make moves and they’re going to want to make aggressive moves, but there’s going to be times in this sell-off that the only way to win is to not play.

10:05
And so, for much of this move, I haven’t been chasing. I haven’t been chasing it to the downside. There’s been some short positions that we’ve been profitable on. There’s been some long positions that we’ve been profitable, but there’s been a huge chunk of it where I have just not played at all. Yesterday’s rally, I didn’t even play it.

10:23
Why? Because I wasn’t going to chase a five percent gap. Didn’t know if it was going to go up 10%. The market’s been very unreliable. Yes, it was due for a bounce, but I wanted to see that it could actually rally two days in a row besides getting in and then slammed the next day like has been the case every time since February 11th.

10:41
But now today we’re actually getting a rally. I can play that a little bit and take this bounce a little bit more serious here. But for the most part, there hasn’t been a good winning move. So my move has been to not play. And as a result, I actually did win. While the market’s selling off, while people are just blowing money on both sides of the trade, I’m winning.

10:57
I’m keeping my profits because when the market finally does settle down, I will be out of place to not have to recover. I won’t be recovering. I’ll be only adding to what I’ve already made. And what a huge benefit to be in. And that’s how it’s been in the trading block. Look, before this was all happening, I had position I had 16, 17, I think sometimes like 20 positions in my portfolio at times. I mean, I was heavily long. I had a few short positions and those ended up helping me at the end. But when there wasn’t a good solid winning move, I never pressed the issue.

11:36
So the dead cat bounce yes, this is likely to be a dead cat bounce. How do you play this bounce then? Because it is a bounce. It’s something that you can play at this point because it’s trying to, assuming that it’s going to try to finish in the green again today, you continue to take profits along the way. You continue to raise the stops, whatever you’re most comfortable with.

11:54
But you have to make sure you’re managing the risk that you just don’t say, okay, I’m just going to get long until I feel like getting out. That’s not a winning trade. The way to manage risk in the stock market is by always knowing where you’re going to go out if you’re completely wrong on the trade. Where will you get out at?

12:12
Because when it comes to me and my trading, this is my approach: I know where I will get out every time before I get into a trade. Why is that? Because I always assume that I’m going to be wrong on my trades. Always assume. I always expect to lose on my trades. When I’m right on a trade, guess what? I just consider myself lucky.

12:29
Okay. And even though I have a winning percentage in my trading, I win more times than I lose, I still always consider myself lucky on my trades. And why is that? Because all I care about is managing the risk. The profits always take care of themselves. So on this dead cat bounce assuming that it is keep raising your stops.

12:46
Don’t be afraid to take some profits along the way. That’s okay. Here’s the other thing and a lot of people don’t realize this you don’t have to go after the most downtrodden, beaten-down stocks there is out there. Yes, they’re the most appealing because you take a company like Boeing, it goes from 446 or so down to 89, 88 dollars a share and then it bounces. And you look at it like today, you’re like, man, I should have bought into that thing. It’s up 30% today.

13:07
Yeah, but guess what? Those stocks are some of the most difficult trades and they’re also some of the most difficult trades to manage the risk on. And what are we most concerned about? We’re concerned about managing the risk. The profitability of a trade is not what concerns me it’s managing the risk.

13:27
And so you have a market that’s down 30%, you see stocks like Boeing, they’ve lost like 80% of their market cap. Oh, this is a generational buy for and it may very well be. Maybe next year it’s back up at 400. I don’t know. But is that really where we should be focusing if we’re trying to be true managers of risk?

13:43
Should we be going after the Boeings or the scores of other stocks that are way down because they fell apart because the whole world economy fell apart and they’re just kind of like guilty by association plays like Visa or Mastercard or Apple or Microsoft, stocks like Google. These things are trading at incredible discounts. You actually don’t have to trade Boeing.

14:03
You don’t have to trade Restoration Hardware. Yes, they may provide some unbelievable bounces. Roku may provide an unbelievable bounce. But it’s about managing the risk. You don’t have to go there to get a nice profit in this market.

14:20
You don’t have to make more than everybody else. You just have to keep increasing your profitability in the portfolio. You don’t have to hit the greatest rebounding stock out there. Today it’s Boeing. Tomorrow they may be 30, 40% back down again. Not saying that they’re going to, but they could. We’ve seen some crazy things in this market.

14:41
Boeing has definitely been one of the most craziest ones. So there’s a lot of stocks out there that are at crazy low levels. They have some crazy risks associated with them too. But there’s also a lot of good companies that haven’t had those crazy risks associated with them that are trading at incredible discounts. What I’m trying to say is: focus on them.

15:00
They will make a huge difference still for you. Controlling risk is going to be so very important for you and how you turn out when all this is all said and done when the dust settles, when people go back to work how you manage the risk along the way is going to be so important. You want to know something? You got to manage risk before you ever get to this point.

15:18
I’ve been stopped out of so many stocks over the years because I never wanted to get caught in a position where my portfolio was down 30, 40, 50 percent because I refused to manage the risk. I always took my stop losses. And I always increased my profits too. There’s a lot of people that have no problem jumping into a trade, but they’re afraid to jump out of a trade.

15:37
If you can’t jump out of a trade, you should have never jumped into it in the first place. You have to control the risk. Now let’s talk a little bit about this buying into fear concept. Okay, we’re going to this is going to be the last thing I cover here. People want to get into stocks that are trading at incredible lows. You take Boeing, for example. It looked incredible at 220.

15:57
It looked incredible at 190 in terms of, you know, wanting to buy the dip on a stock. Right? Looked incredible at 151, 2090, right? There’s only one price that actually paid, and then so far that may not even be the bottom.

16:12
And it either it goes from like 90 up to like 168. You just made an incredible return, like almost doubled your money in some sense. But if you had bought in at 220, you would have seen like a 60+% sell-off in your position.

16:28
Could you have handled that? Most people can’t. I cannot. I’m not holding a stock 60% down. I would have been stopped out of it. As soon as I got into it, probably even at 190 it looked attractive people could have gotten into it. But there’s a lot of people, like I said, that will not jump out of a trade.

16:47
So they’re dealing with this stuff. They bought in at 220 thinking that had to be the bottom and it goes down to 90. It’s up 35% today and like it’s an incredible amount over the last three days. But guess what? The people who bought at 220 they’re still way down on the trade.

17:05
So you can go bargain hunting on some of these trades, but you got to expect that it can go down. If you take a stock that was originally trading at $100 and it goes down to $10 that’s a 90% decline. You look at it and say, man, the thing’s dropped $90. It’s got to be almost at a bottom here. So you buy into it at $10 and it goes down to $7. How much are you down? You’re down 30%.

17:21
All of a sudden. What about the person who bought in at $100 and is sitting on a 90% loss? Well, he’s just sitting on a 93% loss. And now in the grand scheme of things that’s not that big of a deal for the person who is still holding at $100. But for you who bought it at $10 thinking that you’re going to nail that bottom, you just found yourself 30% down needing a 42% rally just to get back to break even. So picking stocks at the bottom is not that easy.

17:40
You don’t have to be the first one in. Didn’t buy that rally yesterday didn’t bother me at all. Jumped into the market a little bit today with two new long positions. They may or may not work, but I will be managing the risk along the way. Then of course there’s people who are, you know, geared towards buying like Clorox, Netflix, Kroger, Zoom because they’ve held up pretty well in this economy.

18:02
But they have this inverse relationship with the market. So as the market does worsen, all the places start shutting down and people need disinfectants and need groceries and need streaming services and need online meetings these stocks tend to hold up pretty well or even go higher.

18:21
But then when the market starts to rebound then guess what? People aren’t flooding the supermarkets like they were out of fear. They’re not sitting home all day watching Netflix because they lost their jobs. They’re not having to disinfect everything and they don’t need online meetings because now all of a sudden they’re in the meeting room at work.

18:38
So what’s going to happen to those stocks? Well, they’re probably going to go down. So when the market rallies, they tend to go down because the market’s rallying out of hope, thinking that things are getting better, then those stocks are going to pull back some.

18:56
So it’s something to keep in mind. They have like more of an inverse relationship of late. Now when things go back to normal and stocks start to find their true worth after all is said and done after people go through a couple seasons of earnings and everything else then those things will probably get more realigned with the market going forward because we’ll be under more normal conditions.

19:21
But for now, you got to realize that those things are not going to go up oftentimes when the market goes up because they’re more of a fear stock that benefits off of fear and selling in the stock market as a whole. Guys, it’s tough out there and let’s wrap this up and I’ll just give you a little few words of encouragement. One this will soon pass. If you don’t know what the winning move is, it’s probably to not play at all. And when I say that, it doesn’t mean that you don’t ever trade again or you just sit the entire sell-off out and ignore any opportunities that might come your way, because there will be opportunities. You do got to take them.

19:39
What I am trying to say is that not every day you need to make a move in this market. Doing less is oftentimes more. I’ve been trading less in this market than I have prior to this whole thing happening. Less is more because I’m looking for the right opportunities that I can manage the risk and let those profits take care of themselves.

20:00
That’s going to be it for today. Take care, guys, and keep your head above water. God bless you guys. Thanks for listening to my podcast, Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block, where I navigate the stock market each day with traders from around the world. With your membership, you will get a 7-day trial and access to my trading room including alerts via text, email, and WhatsApp.

20:21
So go ahead, sign up by going to SharePlanner.com/tradingblock that’s www.shareplanner.com/trading-block. And follow me on SharePlanner’s Twitter, Instagram, and Facebook, where I provide unique market and trading information every day.

20:39
Do you have any questions? Please feel free to email me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.