How to Buy Stocks Near the Bottom
“Buying the bottom” sounds fun until you realize a few weeks later that the bottom you were buying wasn’t the true bottom.
Over the past few weeks as the market has gone through this correction, I’ve watched market participants continue to buy thinking they’re getting a good price. Only to watch those same stocks continue to bleed lower in the following days and weeks as the drawdown continues.
Reality is that a stock can be 20%, 30%, even 50% off its highs and still not be near a true bottom.
What makes buying stocks in a downtrend so difficult is how convincing the bounces can be. The most powerful and vicious rallies often happen within downtrends which makes it very easy to start buying near a local high thinking you’re buying in the middle of a major turn.
In reality you’re often just buying the top of a rally only to realize you stepped into what many call a “dead cat bounce.”
This is often one of the biggest mistakes a market participant can make, and yes it’s avoidable…
If you know what to look for.
In the remainder of this article I’m going to discuss how bottoms develop, how I buy stocks in a downtrend near the lows and the setups I look for, the psychology behind a bottom, what exactly I look for to determine a bottom is in on both individual stocks and the indices, examples of what a bottom looks like with annotated charts + commentary, and much more.
This is a timely article that I think everyone can benefit from as the market searches for it’s next bottom.