FB: How (wisely) to BUY the DIP?

8 בפבר׳ 2022

Hello traders and investors! Let’s see how FB is doing today! Some may say it is never wise to try to buy the dip. Let's see if this argument makes sense.

After earnings, FB is in a very strong bear trend, and it seems there’s nothing to help it. However, if you want to buy the dip, there’s a right way and a wrong way of doing it. Always avoid buying something only because it “dropped too much”. We can’t possibly know where the bottom will be, but eventually, the charts will give us clues when the bear trend starts to get exhausted.

A bear trend is defined by lower highs/lows, and as long as we see this pattern, FB will not be a buy. To be honest, it is not a sell either; as it seems it is too late (the moment to sell was near $ 350).

What could change things? If it does a higher high followed by a higher low, it’ll do something new that will break the bias. What’s more, there are many bullish chart patterns that could appear in the next few days/weeks that could work as bullish reversal patterns (for example: Double Bottom, Cup&Handle, Inverted H&S, etc.).

It is not wrong to try to catch the dip, but if you have a strategy, and if you use the charts to do the proper risk management, everything will be alright.

Now, let’s look at the weekly chart:



Yes, FB lost its two last supports, and it seems it wants to hit the black line at $ 207, our next support. When you are waiting for an opportunity to catch the dip, it is perfect to see a good bullish reversal reaction near a strong support level.

If FB reacts near the black line, the risk/reward ratio would be good, and it makes sense to try to get advantage of some exhaustion. To sum up, look for a clear bullish reversal, preferably, near a support level. The risk reward ratio would be attractive, and you won't buy only because your "gut feeling" is telling you. In this circumstance, it is very wise to try to catch the dip.

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