How to buy on the dips

How to buy on the dips

Buying quality stocks with investment grade balance sheets on major dips when they’re mispriced by the market is a ‘no-brainer’.

For example, Macquarie Group (ASX: MQG) fell from a 2015 high of $85.15 to below $60 mid-February 2016 – a decline of over 20%. Similarly, BHP Billiton (ASX: BHP) fell from a 2015 high of $34.12 to under $16 early in 2016 – a decline of around 50%.

During the early 2016 sell-off, courtesy of fears over China’s share market correction, countless other stocks also found themselves seriously over-sold.

While buying at the bottom, is virtually impossible, you should – everything else being equal – have a good idea of where along a stock’s price decline makes for attractive buying.

But remember, it’s important to differentiate a buying opportunity for a trader – someone who might be using technical charts to throw-up much shorter-term trading opportunities – and longer term investors, who are buying stocks more on fundamentals than share price momentum per se.

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