As I said last week, US stocks have a chance to bottom out and rebound, but the most important thing is to rise to the current price, and then what will happen?
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Let’s talk regarding some rebound characteristics first. Usually following a larger correction, when the market situation improves, basically whether it is a strong stock or a weak stock, it will initially rise. In particular, some stocks that have fallen the most before, will rise even more.
However, following the initial period of the rally, not every stock can continue to rise. Some weak stocks may only run amok or fall back following the rebound. Only some stocks will be able to rise further.
So what should we do?
First, don’t feel that the decline is over just because some stocks have rebounded a lot from their lows. Weak stocks, rising sharply can fall sharply.
Falling a lot doesn’t mean attracting
Second, don’t use the past to measure a stock. In the past two or three years, in fact, the operating environment of many companies has undergone earth-shaking changes. Some investors will like to use the “reasonable price-earnings ratio in the past to judge the stock’s fair value. However, this is very dangerous. If a stock’s prospects have deteriorated, but you still use the old ruler to measure the stock’s valuation, There is a high chance of error.
Third, don’t buy stocks that are running rampant or falling. These stocks have the opportunity to represent that the market is no longer sought following, and may not be able to rise once more following that. Instead, buy stocks that are strong and continue to rise.
In fact, don’t be tempted to buy stocks just because they’ve fallen so much. A fall in the stock price is not a reason to buy. Many stocks, from top to bottom, have fallen for more than a year, with a drop of more than 80%. If you invest with the concept of buying a stock if you see a much lower price, you will easily lose a lot of money.
How much it falls is not the point, whether it can rise or not is the key. Apple (AAPL), for example, is a promising stock. Did it drop a lot before? No, the high gauge has not fallen by 20%. But when the market situation improves, it can still rise. Judging from the current situation, AAPL’s share price has a high chance of breaking the top once more.
Mo Jiaqiang
This column is published every Friday