After seven consecutive down days and a swift, brutal stock market correction, we’re bound to see a few up days quite soon. Please be cautious. There is absolutely no hurry to begin buying stocks. If you have a lot of cash, go ahead and buy a little Netflix (NFLX) or Amazon (AMZN), or a stock that’s yielding a 7% dividend like Dow Inc. (DOW) or Designer Brands (DBI). But if you have just enough cash to buy two or three stocks, keep your powder dry. For the most part, this is a gambler’s market until trading patterns develop, both with individual stocks and with market indexes.
That said, the price chart on NVIDIA Corp. (NVDA) looks far more attractive than those of 95% of stocks right now. NVIDIA was featured in my publication, Cabot’s Ten Best Stocks to Buy & Hold for 2020. I will consider adding that stock to the Cabot Undervalued Stocks Advisor portfolios this week.
I expect stocks to settle down and trade sideways for several months, with price charts that look like mountain ranges: up, down, up, down, up, down. Do not expect your stocks to go back to their early February highs in March. Stock market corrections have a pattern of falling rapidly and recovering slowly.
Think of it this way. The stock market is a star football player who just broke his femur. He can’t recover quickly. But he can eventually completely recover, and he can go on to play again, and to lead his team to another championship game. So right now, we’re at the phase where the football player got injured, and he’s going into surgery. Surgery will probably go well, and rehab will probably go well, but there’s always a small chance that something could go wrong: an infection, a bad reaction to a drug, etc. The stock market will probably settle down and recover, just like the athlete. BUT, it could fall further. So be patient. You will not miss capital gains opportunities by waiting a few days or weeks before you begin buying.
I promise you, if you have your eye on Apple (AAPL), and it shoots upward from 273 to 310 in a few days, it’s going to come right back down thereafter. Then you can buy it. Be patient.