In this post, I will share a personal story. I remember last week talking to a cousin, who does not look at the markets nor has a trading account, about investing. He asked me several questions about getting started and more importantly, how to know where to invest. Since I have talked about Tesla often, I showed him the chart which made him excited about the company.
Tesla Inc (TSLA) July 2020-August 2020
After a little while I asked him the obvious question:
Would you buy Tesla shares?
The answer to him was obvious, he said he would. As I am writing this post, the big tech companies have rebounded a bit from falling for three straight days since Thursday of last week. Tesla shares dropped an astounding 21% on Tuesday amounting to the biggest one day decline ever for the company. This loss was probably driven by the S&P 500 committee’s decision to not add the company to the index as most of investors and followers expected. Moreover, GM announced a $2 billion equity stake in Nikola Corp pushing Tesla’s competition up over 40%. From this I would not have guessed Tesla would have such a strong rebound on Wednesday (10%).
Tesla Inc (TSLA) past 30 days
Slack did not have such a happy Wednesday as Tesla. The company continued to decline following its quarterly report which showed its billings falling shorter than expected. Slack seems to depend more on medium to small sized businesses, which have been deeply affected by the coronavirus pandemic.
Slack Technologies Inc (WORK) past 30 days
I mention the conversation with my cousin because there are millions of investors who may be taking more risk than they would be comfortable with and do not know it. Is this the time to buy the dip or are investors trying to catch a falling knife which will leave them bleeding?