If you are a regular reader of Money Morning Buzz and our daily 3 Stocks to Watch article you’ve no doubt heard the term “Buy the Dip”. The represents a simple and usually effective approach to buying stocks that are in long-term bull market trends.
"Buying the dip" is another way to say purchasing a stock after it's fallen in value. As the stock's price "dips" it may present an opportunity to pick up shares at a lower price with the goal of increasing your future gains, when the stock rebounds to continue its rally.
The concept is a well-known strategy, especially in markets that are at all-time highs, like we’ve seen in 2024.
We’ll look at NVIDIA since the stock is one of the most popular “buy the dip” names out there.
Let’s just say that I’m an investor that decided that I want to own 300 shares of NVIDIA after the company hit new all-time highs in January, but I don’t want to buy at those highs.
The buy the dip strategy is perfect here.
Let’s look at what would have happened if you followed the strategy in March 2024.
The week of March 4, shares were trading just below $100 at $97. You could simply purchase the stock at that price and then hold through today and your investment would currently be worth 34.7% more than you paid.
But let’s say that you hold off on buying at the highs and instead draw a line at the price where you want to buy the shares on a dip.
You’ll need to determine how much of a “dip” you want the stock to make before you buy your 100 shares. That is usually determined by the volatility of that stock.
In NVIDIA’s case, the stock averages multiple 20% declines in an average year as the stock is one of the more volatile in the Nasdaq 100. Fortunately, investors are always looking for opportunities to buy the dip on NVIDIA, 20% is a fair target price for a dip.
If you used that target – to buy the dip after 20% - you would have targeted a price of $77.60 back in March.
A little over a month later, on April 19, NVIDIA indeed dropped to that price and a little lower, activating your “Dip Price Trigger”, resulting in an investment of $7,760 for your 100 shares of NVIDIA.
Now, fast forward to today. 100 shares of NVIDIA are worth $13,068 at Thursday’s close, but the Buy the dip strategy posts current returns of 68% compared to the strategy of buying the shares at the March highs.
Investors can choose to either stick with their first dollar cost averaging strategy or add to their position at the same “Dip Price Trigger”. In this case you would target another 20% decline after your initial dip investment.
In NVIDIA’s case of using the 20% trigger you aren’t likely to see too many 40% or more drops in the stock to trigger additional investments.
Given the current “froth” in the market, there are several stocks that have been leaders that are currently trading at or near their all-time highs.
Let’s look at a few of the stock that I talk about often here on Money Morning for “Buy the Dip” opportunities and Trigger Prices.
Palantir may be one of the most loved and hated stocks in the market right now.
On one side, there are the analysts. Wall Street analysts have held out on recommending this stock since it’s started its bull run in 2023. The reason, simple… they were burned on being bullish on Palantir in 2021 ahead of the stock’s 80% crash in value.
They haven’t forgotten that pain, even though Alex Karp – Palantir’s CEO – has made a pojnt to call out the Wall Street analysts every time the company’s earnings have come in better than expected.
Put simply, this is good for the stock.
Sure, shares are overvalued at 30X sales and with a p/e ratio of 500+. But as I’ve said before, we’ve seen this movie before. Amazon, Microsoft, Intel and other companies that were all part of the incredible 1998-2000 rally all boasted ridiculous valuations.
It’s a reminder that a company’s value is what the market assigs it through its price, not what an oversimplified ratio reflects.
You want to make your investment decisions using a p/e ratio? Stick to buying Procter & Gamble (PG), Exxon Mobile (XOM) and Colgate Palmolive (CL) while the rest of the market leaves you behind.
Back to Palantir….
This week saw shares of Palantir drop more than 20% to their lows following two big headlines.
First, Alex Karp adjusted his plan to sell more than $1 billion in Palantir stock.
Second, the Department of Defense is set to make an 8% cut to its budget over each of the next five years.
The combination of news triggered a round of fear selling and profit-taking in Palantir shares. That selling dropped PLTR to its first “buy the dip price of $100.
$100 has provided short-term support for the stock this week but may give way next week as the market makes its way through the volatile Week Nine, leading us to the second “Buy the Dip” price trigger for Palantir, $85.
$85 represents Palantir’s 50-day moving average. That trendline is one of the most important that traders watch meaning that we will see significant buyers enter the market to add Palantir to their portfolios at a 32% discount to the stock’s recent highs.
A strategy of buying 100 shares at each of the “Buy the Dip Trigger Prices” above would result in the following profits when Palantir shares return to their $125 price.
Crowdstrike holdings have been one of the AI Service companies that have led the market higher in 2025.
The company’s most recent earnings report surprised investors with its better-than-expected results, despite CrowdStrike’s ongoing legal battle with Delta Airlines (DAL).
Shares of CRWD have added 45% over the last year and are trading above their bullish 20- and 50-day moving averages.
Shares dropped more than 7% from their all-time highs today following news that the company will be investigated by the Department of Justice (DOJ) and the Securities Exchange Commission (SEC) regarding a $32 million deal between CrowdStrike Holdings Inc. and a technology distributor to provide cybersecurity tools to the Internal Revenue Service.
Shares immediately found support at their 20-day moving average ($415) and rallied back to $435, but the sudden drop may precede a better opportunity to buy the dip on this hot cybersecurity name.
The “Buy the Dip Trigger Prices” are simple here.
Investors can simply use the stock’s 20- and 50-day moving averages as their trigger prices. Those trendlines would currently have you buying shares at $415 and $385, a 7.5% and 15% discount respectively.
The table below displays a scenario of buying 50 shares at each of these prices and then the rate of return that an investors could expect following this strategy.
Nuclear stocks like nano Nuclear and Nuscale Energy (SMR) have fallen quiet after a robust rally in the closing months of 2024.
Shares of Nano Nuclear traded as highs as $45 in the early days of January, but have fallen to their current $30 price tag as investors have been watching other “shiny objects”. That said, the run for these stocks is not over.
Two weeks ago, the new Secretary of Energy signed his first order directing the department to “Unleash Golden Era of American Energy Dominance”.
The order details that “the Department’s R&D efforts will prioritize affordable, reliable, and secure energy technologies, including fossil fuels, advanced nuclear, geothermal, and hydropower.”
The Trump Administration has been bullish on the development of Small Modular Reactor technology as an efficient and effective way to expand the company’s power supply for growing data center use.
Nano Nuclear Energy has been at the forefront of the development of this technology.
NNE shares are trading at their 50-day moving average, the first “Buy the Dip Trigger Price”. That trendline is also sitting at the $30 price mark, a significant round number support level.
A break below this price would target further declines to $25, the second “Buy the Dip Trigger Price” for the stock.
With Nano Nuclear, there is a potential chance that the stock would fall even further to $20 in the case of a broad market selloff. This would provide a third “Buy the Dip Trigger Price” for investors.
The table below displays the expected return when the stock returns to its $45 highs after following the “buy the Dip” strategy above.
