Buying on a dip is one thing. Buying in a dismal, cratering stock market is quite another.
“These days, the dip-buyers are lacking confidence,” said TheStreet’s James “Rev Shark” Deporre.
Small-caps, growth, biotechnology, and other lagging groups aren’t being sold aggressively, and they lack bids – and there’s a good reason for that. “There isn't much interest in trying to bottom fish these stocks hovering at 12-month lows when the indexes are acting so poorly,” Deporre said.
Like a lot of smart traders, Deporre is waiting out the market and is not doing too much right now.
“There are plenty of great stocks out there I want to buy, but they need better price action,” he said.
Still, if you’re in the mood to buy stocks at depressed prices, these market names are ripe for consideration when things start to improve.
Ford
Ford (F) stock was down almost 20% last week. Does that mean an opportunity for the bulls or do they need to see more downside first?
Shares were active "after the Dearborn, Mich., automotive icon booked more than $8 billion in gains from its Rivian RIVN investment,” said Real Money's Bret Kenwell. “And that was after it hit new highs in the prior week on reports that Tesla’s (TSLA) Cybertruck was facing delays.”
In late December, the bullish catalysts were piling up and Kenwell called for Ford stock to break out even further. Meanwhile, Ford had been trading up in previous weeks and sported five straight monthly gains.
“When I look at the chart, I see some positives and some negatives,” Kenwell said.
The bad news comes first: “Clearly, Ford has broken below a number of short-term moving averages,” Kenwell noted. “Worse, it’s struggling to regain the 21-day moving average and the $23 level.”
While the $23 level was a notable upside extension area, the stock’s inability to reclaim it does create questions about how much strength the buy-the-dip crowd really has.
Specifically, it makes Kenwell wonder: “Does Ford stock need to pull back a bit more?”
Citigroup
Like many big financial stocks, Citigroup (C) saw its share price fall late last week.
“Citigroup is down about 2% despite beating earnings estimates, while Wells Fargo is up more than 3% after its results blew past expectations,” said TheStreet’s Bret Kenwell. “Yet the financial sector has been one of the best-performing groups at a time where tech stocks are falling hard and as the market remains in a state of uncertainty.”
Unlike some of its peers, Citigroup was trading quite poorly until recently. Shares hit a new 2021 low in December near $57.50 before reversing higher and gaining some nice upside momentum.
“Amid the dip, buyers have been stepping in at the stock’s 10-day moving average,” Kenwell said. “That’s healthy buy-the-dip action — assuming it holds. If it doesn’t, let’s see if the 50-day and 200-week moving averages can buoy Citigroup stock.”
The trouble lies in a break of the 21-day moving average. “In that scenario, $60 could be in play, followed by the December low,” Kenwell said. “On the upside, let’s see if Citigroup can clear this week’s high up at $68.65. If it can, it puts the 200-day moving average in play.”
AMC Entertainment
Not only did AMC’s (AMC) stock fall by 12% last week, it’s also fallen 36.99% in the past month.
In fact, AMC stock is about to set its largest decline from a peak ever. Is this an opportunity to buy and bet on the next rally, or a sign that the meme saga is reaching an end?
Right now, the unwind continues, according to TheStreet’s Daniel Martins – and it has no end in sight.
“Right after lunch break on January 18, AMC stock dipped below $18 per share,” Martins said. “These levels have not been witnessed since late May 2021 — that is, a mere few days after the most recent major rally began to take shape.”
For investors, the question is a simple one. Is AMC a house of cards that is about to crumble? Or, could this be a rare opportunity for traders and investors that missed out on last year’s historic meme rally to partake in the next leg higher?
AMC’s stock is now trading 70% below last year’s peak, and could, at any moment, match the maximum drawdown of 72% reached in February 2021.
“Whether this is good or bad news is open to interpretation,” Martins said. “The glass-half-empty view is that AMC share price is finally descending to levels that are a bit more consistent with the company’s fundamentals.”
This is not to say that AMC is a bad business, or that the movie operator might be in trouble. “In fact, the company has been recovering well from what was perhaps the most disruptive crisis in its 100-plus years of existence,” Martins said.
Here is where the glass-half-full argument comes into play. Most AMC shareholders know very well that the stock does not trade on fundamentals, but on buzz and excitement instead.
“From that point of view, AMC continues to be a popular meme stock on the verge of undergoing a massive short squeeze,” Martins added. “The ticker is still a top five “most discussed” on Reddit, according to Ape Wisdom. And with nearly 20% of the float shorted, a run to cover short positions could help to trigger a rally at any moment.”
So when will the next bullish attack happen? Or will it happen at all? “Stay tuned, as 2022 may prove to be an eventful year for AMC stock,” Martins noted.
