This stat is more powerful than the crowd⦠[TradeSmith Daily]( Before You Sell TSLA, Read This
By Lucas Downey, Contributing Editor, TradeSmith Daily If youâve ever seen the aftermath of a violent riot… or felt the rush of excitement in a packed football stadium… you know crowds are powerful. You can feel the emotion like a wave of energy. Especially when those spirits are negative. According to study.com, âthe collective behavior of crowds causes people to lose their individuality and act irrationally.â This is remarkably accurate when it comes to the stock market… and especially after the advent of social media. Think back to NVIDIA (NVDA) and Meta Platforms (META) back in late 2022. Both fell in spectacular fashion, causing the online crowd to spit bile at anyone who suggested better days ahead. And back in September, Target (TGT) falling hard after management told Wall Street how big of a deal theft is. But irrationally following the crowd does nothing good for investors. Those trying moments, while tough to swallow, ultimately proved to be great buying opportunities. Today another well-known company is under fire in the media. Once hailed as part of the elite Magnificent 7, Tesla (TSLA) has fallen 34% in 2024. (Disclosure: Iâm long TSLA.) After calls from analysts suggesting the iconic EV maker will not grow this year… the crowd is selling — and yelling about it. This got me thinking. Is there a potential bullish signal in all this noise? Turns out there is. Today Iâll share a historical study on the current drawdown and see what our research says is likely ahead. If you hold TSLA and are itching to sell, this might just change your mind… RECOMMENDED LINK [The Convergence of A.I. and Crypto Is Going to Create Generational Wealth](
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Stocks go up… and they go down. Tesla is now very much part of the down. In 2024, shares have lost a third of their value. And the last two weeks have seen a monster slide, with shares off nearly 20%:
A chart like this could have you frozen like a deer in headlights. Or worse… as part of an angry mob. But I donât see that as a meaningful way to view price action. Iâm more interested in trying to uncover a data-driven meaning to this staggering move. And thatâs what weâll do today… by utilizing some killer TradeSmith software. Given that Tesla shares have slid 19% over the prior two weeks, we went back and asked two pressing questions:
- How often has TSLA fallen 19% or more in a two-week period
- What happened to the share price afterwards?
Turns out, since 2010 thereâve been 59 instances when TSLA shares fell 19% or more in a two-week period. This is a nice chunky dataset to study! And what we learned is that siding with the crowd on this one is likely a bad idea… When Tesla stock falls 19% or greater in 10 trading days, hereâs what the bears miss:
- A month later, shares jump 24%
- Two months later, the stock gains a mind-blowing 39%.
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These drawdowns have ultimately offered value to those using fear to their advantage. And when you think about it… it makes intuitive sense. By focusing on top-tier companies, pullbacks ultimately equate to rare buy-the-dip opportunities. Think about any of the all-time-great companies. Every single one had meaningful setbacks from time to time, alongside a mad crowd. Iâll say it again. Crowds are powerful… when you know how to use them to your advantage. Let them yell, but donât follow their emotional moves. Instead, focus on stacking the odds in your favor with TradeSmithâs elite data. Chances are, your portfolio will leave the doubters in the dust. Regards, Lucas Downey
Contributing Editor, TradeSmith Daily P.S. TradeSmith was founded because of a single, simple idea… How can we [make it easier for everyday investors to know when to cut losses, and when to hold fast]( Out of that idea came TradeStops our elite portfolio management software that shows you the precise level to sell any stock you hold. Sync securely with your brokerage, and we handle the rest… giving you [an action plan for every single one of your positions]( — whether itâs up or down. Our work on TradeStops continues to this day, refining and improving the base algorithms that power it and the rest of the TradeSmith software suite. I consider it a must-have tool in your kit. [Click right here to learn how you can start using it today.]( Get Instant Access
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