One of the easiest ways to outperform the market is by staying ahead of stock trends and planning accordingly. While it may sound straightforward, many investors overlook the best time to buy—during a short-term dip.
Instead, the average investor falls into the trap of buying near a stock’s highs, driven by FOMO (fear of missing out) and the belief that prices will keep climbing without them. The key to avoiding this mistake? Plan for the dip.
Just weeks ago, I spotted warning signs in the market and emphasized that it was the perfect time to prepare your “Buy the Dip” strategy.
With stocks now trading about 5% lower, we’re getting close to hitting “Buy the Dip” prices on a few of 2024’s best performing stocks. Names that are likely to continue their strong moves into 2025 and beyond.
The combination of lower prices and strong bullish trends makes it the right time to start considering buying the current dip on these performers. I’ll walk you through the stocks and the details on each of their “Buy the Dip Target Prices” in a minute.
What is a Buy the Dip Strategy
The Buy the Dip strategy is a popular approach where investors purchase assets after a price drop, expecting the value to rebound.
The idea is to take advantage of temporary declines, buying at a discount in anticipation of future gains.
This strategy works best in bullish markets or with assets that have strong fundamentals, as these dips are often seen as short-term corrections rather than signs of long-term decline.
To succeed, investors need to analyze market trends, use technical indicators, and identify key support levels. Risk management is crucial to avoid losses, especially when a dip could signal further downturns.
An Example of Buying the Dip
Let’s examine NVIDIA, one of the most popular “Buy the Dip” stocks.
Imagine you’re an investor wanting to own 300 shares of NVIDIA after it hit all-time highs in March. However, you’re hesitant to buy at those elevated prices. This is where a “Buy the Dip” strategy comes into play.
During the week of March 4, NVIDIA shares were trading just below $100 at $97. Buying at that price and holding until today would have delivered a 34.7% gain.
But instead of buying at the highs, you decide to set a target dip price, determining how much of a decline you’re willing to wait for. This is often guided by the stock’s volatility.
NVIDIA, known for its frequent 20% dips due to its volatility within the Nasdaq 100, makes a 20% drop a reasonable target for a dip price. Using this strategy, you set your “Dip Price Trigger” at $77.60 in March.
On April 19, NVIDIA hit that target, dipping slightly lower, allowing you to purchase 100 shares for $7,760. Fast forward to today, those 100 shares are worth $13,068 at Thursday’s close—a 68% return using the “Buy the Dip” strategy, compared to a 34.7% gain from buying at the March highs.
3 Things to Remember
- Buying the dip is a strategy for strong bull markets, not for stocks that have fallen into a bear market trend.
- Setting a “Target Price” is the best strategy for taking the emotions out of buying the dip. Many investors will balk, thinking that the price of a stock will go even lower. You’re not trying to time the exact bottom, just a better price.
- Buying the dip can be used to open a new, or build to an existing position.
Three Buy the Dip Stocks
Nano Nuclear Energy
The Nuclear AI trade is alive and well, but things ran into a bump in December.
Investors started taking profits from several of the nuclear AI trades, affecting shares of Nano Nuclear Energy (NNE).
Shares of NNE had traded to their highs over $30 near the end of November as investors speculated that the Trump Administration would be welcoming to nuclear power as a solution to the country’s growing AI energy needs.
That hasn’t changed, but the luster has come off the “Trump Trade” for now as investors are focusing on the potential downside of the Administration’s plans for tariffs.
On its own merits, Nano Nuclear still possesses the qualities of a “Buy the Dip” Candidate. Even better, the stock’s price is currently trading near its “Target Price”.
Shares of Nano Nuclear are trading in long- and short-term bull market trends. The most notable feature that investors will want to pay attention to is the stock’s bullish 50-day moving average. That bullish trendline is trading at $25, a round-numbered support level which is just below NNE’s current price.
Bottom line, the “Buy the Dip” opportunity is here and now for Nano Nuclear Energy stock. Investors should consider the $25 level as the Target Price based on support from the stock’s 50-day moving average.
If the stock were to decline further from here, the next “Buy the Dip Target Price” would be the round-numbered $20.
Purchasing 100 shares of NNE at each of those target prices would result in a return of 51% if the shares returned to their $34 highs.
Rigetti Computing
Shares of Rigetti Computing (RGTI) are hovering at their all-time highs after an incredible year-end rally. The stock traded at $3.00 on the first day of December and finished the month more than 500% higher.
Rigetti’s stock posted this strong performance as the company was “discovered” by the market as a participant in what is likely to be the hottest industry in 2025, Quantum Computing.
Quantum computing is the next logical step to follow the innovations that we’ve seen in AI over the last five years.
Companies like Google, NVIDIA and IBM will be included in this innovation movement. But it’s less-known companies like Rigetti that will post the incredible returns as they grow with the industry.
Rigetti Shares check the boxes for a Buy the Dip candidate…
The stock is locked in a long-term bull market trend, recently positing new all-time highs. Investors are likely looking for an opportunity to buy the dip, which means the opportunity should be short-lived.
The closest technical support level is the stock’s 20-day moving average, currently just above $10. Investors aren’t likely to wait for a 50% decline in the stock, so using key price levels will determine the target price for buying the dip.
Shares of Rigetti have seen support and a consolidation between the $17.50 and $15 price levels.
Both prices qualify as “round numbers” as $17.50 is the mid-price from $15 to $20.
All of this points to establishing a buy the dip target of $17.50 and $15. Investors can use one or both as prices to buy the stock.
Be warned that the $15 price may not happen leaving those waiting for a deeper dip behind.
IonQ Inc.
Another cloud computing company, IonQ Inc. (IONQ) roared into the end of the year as shares rallied 63% from their December lows.
is a leading pure-play quantum computing company, specializing in the development of advanced quantum hardware and software.
The company’s quantum computers are designed to solve problems beyond the capabilities of traditional computers. This addresses fields like artificial intelligence, cryptography, finance, and material science.
IonQ’s systems are accessible across major cloud platforms, including Amazon AWS, Google Cloud, and Microsoft Azure, making quantum computing broadly available to businesses, researchers, and developers seeking to innovate with cutting-edge technology.
Shares of IONQ are in a strong bull market trend and recently posted new all-time highs at $48. Since then, the stock has been in a consolidation phase with the potential to make a short “dip” lower.
On Thursday, IonQ shares found short-term support from their 20-day moving average just under $40, but another round of selling next week may break that support.
Given the stock’s bullish volatility – the price often makes exaggerated moves within its bull market trend – a two-price Target Price makes sense. This allow investors to enter a position almost immediately while waiting for a lower price to add to that position.
Using that approach, IonQ has a Target Price of $40 and $35 for buying the dip.
Shares are currently trading just under $45 on light volume. The lighter volume of trade suggests that the stock still has some downside risk as we move through the first weeks of January, but the long-term outlook suggests that IonQ Inc. is s great “Buy the Dip” candidate at its current price.
— Chris Johnson
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Source: Money Morning