Should We Buy Tech?

July 15, 2024

We’re in a very interesting period for the stock market.

On the Nasdaq in particular.

AI and tech stocks have soared and many “experts” say that we’re only at the beginning.

Fortunes are to be made!

Of course, that’s what everyone said during the Dot-Com bubble, and almost everyone went down in flames. Many people reportedly never traded again.

Is this time different?

In one way, yes.

For example, NVDA is way, way overbought and is at an extreme by any metric. That’s exactly what every dot-com stock looked like in 2000-2001.

But, back then, companies didn’t have any earnings. The stock prices were based on hope and made up projections.

This time, NVDA has tripled its earnings. It’s doing great. So is its price okay?

Probably not.

But it’s also probably dangerous to bet against it.

The tricky thing right now is picking the right stock. Many traders will fail trying to find the next big thing.

How can we not fail?

By not choosing.

We can have a chance at big gains and not miss out if we just trade the Nasdaq as a whole.

Great, when and how should we buy the Nasdaq?

If we’re trading stocks, I would choose the QQQ ETF or the TQQQ. And, as we’ve talked about, I would use a “value investing” mindset.

This means buying when stocks are equal to or lower than their “fair value”.

And for me, that means buying when price is under the 800 SMA.

Back in December 2023, I did that (although not very well).

I took a small position in my smaller stock account on TQQQ. Why? I like TQQQ better than QQQ. Why buy then? Because it was right at “fair value”, and, historically, buying QQQ/TQQQ when it gets near “fair value” has worked very well.

I should have bought it earlier.

Here’s a chart:

As you can see, buying anytime between May 2022 and January 2024 could’ve gotten us in at a decent price. I bought at the arrow (just slightly above “fair value”).

That turned out to be a good time nonetheless because TQQQ has bolted to the upper Band. I’m up 68% as of this writing.

Am I selling?

No, not for a long time. I have reasons for that (that we can discuss at another time).

But I will buy again if price ever falls below “fair value” again.

There’s a problem with this discussion, though. There’s nothing to do now.

It’s probably too late to buy QQQ. It’s going to fall back to the SMA at some point and buying now could get us underwater quite a bit in quite a hurry.

So, are we unable to get into tech then?

Nope.

We have a system that we can start anytime.

And we’ll talk about that in the next Newsletter.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.