Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets.” He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon
This is a 30 minute chart of the DIA, a Dow Jones proxy this morning, 8/24/2015. At the low the DJIA (Dow Jones Industrial Average) was down 1130 points. WOW!!!!
In a conversation with my trading buddy yesterday I told him I thought the market would reverse its fall Monday or Tuesday with a big gap down and then a reversal so I was prepared for this event. For this to become a true statement the DIA needs to close above 15771. A close below 15771 and we could continue down. I am talking in the short term here. Short term is defined as the next 30 days. In the long term the market is heading lower.
The way I prepared for this event was to check my hot list (about seventy or eighty stocks that are at or approaching value levels) and watch them closely in the pre-market. This list gives me a constant source of new trades.
At 7:00 CDT (open of the pre-market) BIDU was already down 13 at 140 bucks and the DOW was down about 650.00 points. Since BIDU is a highflying Chinese internet stock I decided to wait for the full market open at 8:30 before entering a trade.
In May of 2010 I was long AAPL at $247.00. AAPL was down $11.00 at that price and I was in at a strong support level. The market was down about 300 points and was about to flash crash. I thought I had a great position until the market dropped to minus 1000 (in about 30 minutes) and AAPL dropped to a low of $200.00. I was holding 1500 shares and was down $70500.00 in a heartbeat. I held on as AAPL bounced but lost 24k that day.
AAPL was what I was thinking about as I watched the markets unfold this morning. I entered orders in two accounts at 101.51 and 105.11. My other trading account I entered no trade and had to chase BIDU and got in just under 110.00. The low was $100.00 even. Support was at 91. That was why I only entered orders in two accounts. I didn’t want to be down 10 bucks a share on a couple thousand shares. BIDU wasn’t my only trade today. I also bought MU and URI. There were hundreds of other great opportunities. It’s all in how you look at it.
If you looked at an 1100 point drop as a disaster you need to change your perspective. It is really a great opportunity.