It’s here, guys, for real this time. We’ve been talking about this pullback since the end of 2020, and it happened this week. But don’t panic. If you weren’t prepared, Joy of the Trade’s Jeff Zananiri has advice for trading the Nasdaq correction.
The bond yields we’ve been seeing have investors rightfully concerned about inflation and its impact on the markets. Shortly before we began seeing the correction, Federal Reserve Chair Jerome Powell said despite bond market turmoil, he feels the current policy is appropriate.
That didn’t sit well with investors and the Nasdaq officially entered correction territory, dropping 10% from a recent 52-week high as another sell-off was triggered.
But you guys don’t need to panic, even if you didn’t sell into this. Jeff says we can still fade that move when it comes to trading the Nasdaq correction.
By fade, if you remember from Jeff’s last “Fade That Move” segment, he means taking a contrarian stance on big moves… like what we’re seeing now.
Keep Your Head Straight When Trading the Nasdaq Correction
These moves are scary. There’s no doubt about that. But when a sector has been running as hard as this one — and for as long — it’s to be expected.
Just a couple of weeks removed from a high, we entered correction territory.
But a bounce is imminent. You just have to watch some of the hardest-hit sectors, the ones that are oversold.
We’re looking at the VanEck Vectors Semiconductor ETF (Nasdaq: SMH), an exchange-traded fund (ETF) that tracks semiconductors. And SMH has had a much deeper pullback than the Nasdaq or the broader stock market.
Typically, people are the most nervous about what’s dragging us down. But when looking for a bounce back, you want to see the biggest moves come from those sectors.
So that’s where Jeff’s nibbling. And that’s the philosophy behind his Burn Notice system: Nibble on the areas that are being oversold, because they will bounce back.
So don’t lose your cool guys. Let everyone else panic while you make money trading the Nasdaq correction.