Should You Buy the Dip? | Podcast Episode #479

0:00
Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market. In today’s episode, we’re going to go back to the emails. We got a good e-mail conversation here to to go over. It’s about buying the dip.

0:09
And how do you know when to buy the dip? So this e-mail, this comes from a guy. I’m not going to give his real identity out because that’s part of the show. I don’t use people’s real identities.

0:14
Instead, I give them a usually a a good Florida redneck name unless they have a better name to to OfferUp themselves.

0:21
But this one I’m going to give him the name Merle and Merle writes, Hey Ryan, this sell off is crazy.

0:28
Now remember he wrote this back on April 3rd. So there’s been a little bit of time that’s progressed almost 2 full weeks and he says this the sell off has been crazy today.

0:38
I have been using what I have known of your trading style and I’m actually at break even in my trades today despite how ugly the market is.

0:43
My question is, is how do you decide to jump in and buy something during these downturns?

0:48
It is really tempting for me to stick some money into Tesla today, but I’m basing my trades off of recent sector performance.

0:54
So do you ever buy just because it’s low and if so, how do you know when to jump in?

0:59
You can use this question in your pockets if you feel I like the name Merle. Let’s go with the name Merle.

1:04
OK, Merle. Good question. And I don’t ever just buy because it’s low.

1:08
And here’s here’s some of the thoughts that I would want to give you when it comes to long term investing.

1:13
I do partake in that, obviously, but to a degree, yes. Am I buying because stocks have sold off?

1:17
I am, but there’s a lot more to it. And it also depends on the actions that I take leading up to buying when it’s low.

1:23
So I don’t just buy because it’s low and nothing else. My decision to buy is predicated on the fact that I’ve been selling previously.

1:30
But the manner in which I sell is also important. So what I want to do in my long term portfolio is I want to sell in the strength, buy into weakness.

1:39
OK, that kind of goes back to buy low, sell high, right? Or I guess Warren Buffett said, you know, buying whenever others are fearful and selling when others are greedy.

1:48
So you’re selling in the strength, buying into the weakness. That sounds easy enough, but it’s actually very hard.

1:53
It’s very hard because it means you’re letting go of future prospects for some of your capital.

1:57
It means that when you’re buying into Robin Hood HOOD at $9 and it’s shooting up to 40 and $50 a share and you’re selling, you’re forfeiting the fact that it might go to 60, 70, 80, $100 a share.

2:08
Granted, it hasn’t gone that high, but that’s what you’re giving up.

2:11
And so it’s very difficult for people to sell into strength because they’re worried about what they might be giving up.

2:16
You take AMD during the last major downturn back in 2022, I had an average buy in price at around $59.

2:22
It shoots up over time to $220 or $210 and I’m selling into that strength now.

2:26
It has pulled back dramatically. So now it’s offering me an opportunity in the near term potentially to get long again on it.

2:32
I haven’t yet, but I’m watching it. So selling into strength is absolutely essential for me in order to buy the weakness.

2:39
And there’s a number of different approaches that you can take. The one that I feel is best is selling into strength, buying into weakness.

2:47
But then the opposite of selling into weakness, buying into strength, that’s often times what most people will do. They sell into weakness, they buy into strength, meaning they panic sell usually at the lows.

2:57
People will see their markets, the markets taking their portfolio down 30 or 40 percent. I think in this particular sell off the average retail investor was down 36 percent.

3:04
That means they need about a 50 percent rebound just to get back to break even.

3:07
And so they see their portfolio down and maybe they have been overly aggressive as they near retirement.

3:11
Maybe there’s like one year out and they’ve already have their cruises booked with their wife and they are assuming that the market was going to continue to go higher.

3:17
Now they’re down a third in their portfolio and like, how are we going to pay for this cruise? How are we going to pay for this vacation home?

3:23
What are we going to do if this market continues to fall? I can’t. I can’t risk it. I can’t.

3:29
And that’s the mindset that will lead a lot of people to panic sell or to sell into weakness.

3:34
That’s why selling in the strength is so much more important because when you do get these downturns, you actually are welcoming it because you’re like, I’d really like to get back into some of these shares that I sold at a much higher price.

3:45
But if you’re doing the opposite, where you’re selling into weakness, then you’re taking on these substantial losses.

3:50
And then when you see the market recover, what are you doing? You’re buying into strength.

3:54
And that becomes a much more problematic situation because now you need to go even higher than ever before just to be able to make back the losses that you incurred.

4:02
So I call selling into strength or selling into weakness and buying into strength, that’s panic. That’s panic mentality and you don’t want to take that kind of approach in the trading.

4:11
Now when I’m doing my own individual swing trading, which is different than long term investing, I use stop losses.

4:17
So yes, there’s often times where I will get knocked out of a trade because it didn’t work out in the short term and then I watch it bounce right back up.

4:23
That doesn’t mean I’m going to just chase right after it. I’m usually just going to the next best trade setup that that comes about.

4:29
So again, it’s very much different than your swing trading.

4:33
There are other forms. You can sell into weakness and buy into weakness. But then why did you sell, right?

4:38
I guess in that approach, you’re almost hoping that it’ll keep going down even further.

4:42
But then usually the gains are quite nominal and you want to see it go down substantially more than where you got shaken out of your long term investments hoping to justify a much deeper buy price.

4:52
You don’t want to just get out at 100 and buy back in at 98.

4:57
That doesn’t, from a long term investment, that doesn’t really make you feel too good, especially if you got to pay taxes on that money that you just sold out on.

5:04
So those are the three elements of when it comes to long term investing. I may have actually said four in the beginning. So if I did that, my apologies. It’s actually just three.

5:12
So when the market does give you a sell off, you’re going to be in the best position for it when you’ve been selling into strength and that actually makes it to where you’re welcoming that sell off.

5:22
Now when you sell into strength, does that mean you’re going to get out right at the top? No, not at all.

5:27
In fact, what I like to do is keep a core position of my holdings.

5:30
So for instance, on Robinhood where I got in at $9 and I’ve been selling quite a bit on the way up, I still kept about 25 percent of my position as my core.

5:38
So I don’t necessarily think I’m going to get right back in at $9.

5:42
So there’s a good chance that my entry price or my average buy price is going to increase when it comes back down and I get some more of that position in my portfolio.

5:50
But I want you to think about it from this example here. Let’s say you bought a stock at $100 and you bought 10 shares of it.

5:57
That’s a total of $1,000. It goes up to $200.

6:03
And now I’m not going to talk about partial selling here at all. I’m just using simple numbers so you don’t have to pull out a calculator and try to follow along with me.

6:07
I’m just doing the most simple example that I can think of.

6:10
But 10 shares at $100, that’s going to be $1,000 that you invested in the stock.

6:14
It goes up to $200, so now you have $2,000 in that stock with 10 shares. You sell it. You get completely out of it.

6:21
So now when it’s at $150 a share, you have 13 shares.

6:25
So you’ve actually increased your stake some and let’s say it’s putting in higher lows.

6:29
And this might not be taking place over months or weeks. It’s probably taking place over years.

6:33
So we’re talking long term here.

6:35
So it goes from 13 shares now that you have at $150 up to $250.

6:40
And let’s say you get out of it again at $250. You’re selling into strength, welcoming that market pullback, whether it’s from a recession or some kind of market correction.

6:48
And in the process it pulls back to $200.

6:51
So now you’re actually increasing your exposure at 16 shares.

6:54
Now your stake is at 60 percent and you have far more money in that position than if you had just never sold in the first place and was just buying and holding.

7:01
So selling into strength I do think is very important.

7:04
Now of course there’s tax implications and so forth, or not, if you’re like in a Roth IRA or traditional 401k.

7:10
What I would also tell you to do is check out swingtradingthestockmarket.com.

7:14
This is where you’re going to get all my stock market research each and every day from daily watch lists to stocks that I’m looking to trade, plus a weekly bullish and bearish master watch list that I put out there that I curate all my trades from.

7:26
Plus you’re going to get all of my mega cap research that I do multiple times a week, plus my stock market update.

7:34
So it’s a really good value. Check it out. You’re supporting this podcast in the process.

7:38
Now there was an article that was done by Bloomberg just recently and it was talking about how most people, particularly those under 40, are buying the dip very aggressively.

7:45
And why? Because they’ve never known anything else but buy the dip.

7:49
And so with that mentality of buying the dip, they’ve never seen themselves actually be wrong for doing it.

7:54
They’ve never seen an extended sell off.

7:56
Like you take the dot-com and I’m one of the things I’m very fortunate for, I’m 45 years old, or I will be 45 years old pretty soon.

8:03
I went through the dot-com bubble, which was really a pretty traumatic experience for a lot of people because they saw the NASDAQ sell off over 80 percent.

8:11
They saw it take like 14, 15 years for it to get back to its all-time highs.

8:15
So you can’t just expect that the market every time is going to just go right back up.

8:20
I think because we’ve had a pretty favorable Fed policy going back to 2008, it’s very easy to assume that it will each and every time.

8:28
But essentially people under 40 have never experienced anything but a bull market.

8:32
One of the biggest sell offs that they saw was back in 2020 and it lasted for like four, five, six weeks or so.

8:39
It wasn’t very long and the market bounced right back up and by the end of the year was way beyond its previous all-time highs before the recession ever even started.

8:47
So in their mind, they got to act quick. They got to jump right on it.

8:51
These sell offs don’t last very long, but history would suggest otherwise.

8:55
And if you get caught into one of these that last for two or three years, like what we saw during the dot-com bubble, you could be holding onto a lot of dead money for a very long time.

9:06
So for me, it has always proven well to sell into strength and then buy back.

9:11
But the only reason why I’m able to buy low is because I sold high, because I sold into that strength.

9:16
And I’m trying not to be too cliché by saying buy low, sell high, but it’s always a much more difficult thing to do in the moment.

9:23
Now one of the things I would probably say is that buying low isn’t just good enough because what’s low can go much lower.

9:30
And oftentimes our recency bias will assume something’s low when it’s maybe not that low and that it can come down much lower.

9:37
Sometimes we see a stock that’s pulled back 30 percent but it’s still trading at a 100 P/E multiple.

9:43
And you’re like, how is that really cheap? Especially when you’re seeing other much more reputable or more established stocks dropping down into the 20s.

9:52
So you want to not just say, hey, that share price looks low relative to where it was at three months ago, I’m buying now.

9:59
The other thing that I like to do is I’m not chasing after a ton of speculative names when the market pulls back.

10:05
In fact, what I like to do is focus on the stocks that are going to lead the charge higher.

10:10
And that’s right now, that’s your mega cap stocks.

10:13
That’s going to be your NVIDIA and Microsoft and Apple and Amazon and Google and Meta and Tesla and Broadcom.

10:22
A lot of those kinds of plays, Netflix, those are the ones. Caterpillar, Bank of America, JPM — those are your companies that are going to lead the charge back to the upside.

10:32
And so what I don’t want to do is just load up on, let’s go Newsmax and WeBull and Robinhood and DraftKings.

10:39
Let’s just get into a whole bunch of speculative names. Maybe they work out, but maybe they don’t.

10:45
And if they don’t, you just blew an incredible generational buying opportunity that could have arisen.

10:51
So what you don’t want to do is load up on the speculation. Doesn’t mean you can’t have some speculation in your portfolio.

10:57
I usually try to do like 80/20 where 80 is reputable names, names that I know that the market really can’t rally without those names also rallying.

11:07
When you have the three big ones — Apple, Microsoft, and NVIDIA — and Amazon, you could throw that one in there too.

11:15
But those three, Microsoft, Apple, and NVIDIA, that are worth anywhere depending on the day you’re looking at from $7 trillion up to upwards to the $10 trillion.

11:23
Well, it’s going to be very difficult for the market to be able to rally if those are still selling off.

11:31
So you have to remember that stocks can go lower and that different stocks will bottom at different times as well.

11:36
So historically what I look for is extreme oversold values.

11:40
So I don’t try to believe that I can time the bottom. I can’t. Nobody can.

11:45
I’m not a bottom caller. I’m not a top caller. I know there’s plenty of people.

11:49
I see them on my feeds all the time on Twitter and so forth. Or X, I guess is what I’m supposed to call it.

11:55
They are always bragging about how they call tops and bottoms.

11:58
I actually think that if you want to identify a person who’s not very good at trading, it’s the ones that are saying they can call tops and bottoms.

12:05
They can’t call tops and bottoms. Nobody can call tops and bottoms. It’s impossible.

12:10
Now some people will call tops for a long enough period of time.

12:13
They might have been calling it since 2015 and all of a sudden in 2025 it starts to sell — like, see, I told you it was a top.

12:21
They only focused on the last time they called the top.

12:24
So there’s a lot of that fear mongering that goes on in the stock market.

12:28
But really what you want to do is try to average out your positions over time.

12:32
I bought a little bit of SPY, QQQ, and IWM this past week not because I necessarily thought that the bottom was in but because I don’t know when the bottom is in or not.

12:41
We’re starting to see some historically oversold levels that I track.

12:45
And so I want to start getting in very, very, very slowly.

12:48
Sometimes it’s not even one percent of my portfolio that I’m committing to the market.

12:52
It’s very small, very incremental.

12:55
And I plan these positions to take me anywhere from four to twelve months to play out, maybe even more.

13:03
But what I don’t want to try to do is nail the bottom because most of the time when I do that, I’m probably going to see a much bigger sell off.

13:11
I might see another 20 percent drop in my portfolio if I just try to jump in all at once.

13:16
So that doesn’t make sense at all to do. So I stay away from doing that.

13:21
The risk element, and I still don’t think a lot of people understand the risk element in this market right now, because just like with that Bloomberg article talked about, they’ve never really seen a prolonged sell off.

13:33
They’ve never really seen how bad it can truly get and how bad their emotions can work against them.

13:39
And I see a lot of speculation.

13:41
I saw it with WeNext, Newsmax a couple of weeks ago, and then I just saw it this week here with WeBull.

13:48
They come out with their IPOs and the stock jumps like 400 percent.

13:52
That tells me the speculation is probably way too strong still for there to be a bottom considered in this market.

13:59
So in the end, what I want you to think about is selling into the strength, buying in the weakness.

14:05
I know the popular saying is to buy low, sell high, but I want you to think about it from a different perspective.

14:11
Selling into the strength, buying into weakness.

14:14
If you can do that, I think you’re much further ahead of the ball game than others.

14:18
If you enjoyed this podcast episode, I would encourage you to leave me a five star review on whatever platform you’re listening to me on.

14:25
If it’s on YouTube, then make sure to like and subscribe and let me know down in the comments below.

14:30
What is your thoughts on this market sell off so far?

14:33
Do you think we have a lot further to go and how are you approaching it from a long term standpoint?

14:38
What is your thoughts as well? I would love to hear this too.

14:42
What is your thoughts on buy low, sell higher? Just buying low to buy the dip?

14:46
And check out SwingTradeInTheStockMarket.com.

14:49
Plus send me your questions and emails to me.ryan@shareplanner.com.

14:53
I’m the only one that reads them, nobody else reads them. So send them to me there and very good chance you will get your own podcast episode.

15:00
Thank you and God bless.

15:03
Thanks for listening to my podcast, Swing Trading the Stock Market.

15:07
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15:14
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15:22
So go ahead, sign up by going to shareplanner.com/tradingblock.

15:27
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15:36
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

15:41
All the best to you and I look forward to trading with you soon.

15:44
SwingTradingTheStockMarket.com, it’s where you’ll get access to all of my research each and every day.

15:49
My daily watch lists, weekly master watch lists for bullish and bearish setups, mega cap breakdowns, and broader market analysis, it’s all in there.

15:57
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16:02
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16:09
Let me know what you’d like me to cover in future episodes.

16:13
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16:19
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16:26
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16:32
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16:39
Stay safe out there. Stay smart. Keep managing your risk.

16:44
The market doesn’t owe you anything, but with the right approach, it can still give you everything you’re looking for.

16:50
Until next time, God bless you all.

16:54
Thanks for listening.

16:56
This has been Ryan Mallory with Swing Trading the Stock Market.

17:00
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17:06
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17:11
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17:17
Again, that’s shareplanner.com/tradingblock. I hope to see you in the trading room.

17:23
And remember, always manage the risk and let those winners run.

17:28
Talk to you soon.

17:30
Email me anytime at ryan@shareplanner.com. I personally read and respond to every message.

17:36
Whether it’s a podcast idea, a chart question, or just to say hey, I’d love to hear from you.

17:42
Take care and happy trading.

17:45
We’ll catch you in the next episode.

17:48
God bless.

17:50
Thanks for listening to my podcast, Swing Trading the Stock Market.

17:54
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.

18:01
With your membership, you will get a seven day trial and access to my trading room, including alerts via text, e-mail and WhatsApp.

18:08
So go ahead, sign up by going to shareplanner.com/tradingblock.

18:12
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.

18:20
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

18:22
All the best to you and I look forward to trading with you soon.