“Be fearful when others are greedy. Be greedy when others are fearful.”
The above words were said by Warren Buffet, a man worth $115 billion dollars, a legend, and an icon, widely considered one of the greatest stock investors in history.
Granted, the means and the goals of us, short-term traders, are quite different from those of Warren Buffet, who buys entire businesses and milks them for decades to come.
But if there’s one thing this principle can teach us all – in extreme market circumstances, and under extreme emotions, it may pay to go against your gut feeling.
I, for one, successfully applied this very logic to make two short-term bounce trades in GME and AMC – the names Warren Buffet would not touch if his life depended on them.
The Fear Setup
If you happened to drop by The Octagon – a live trading room where I and Jason Bond buy and sell in real-time – this Monday, you may have heard me chat about GME and AMC.
The former Wall Street darlings have been doing less than stellar lately. Here’s AMC:
And here’s GME:
These are 2 ugly looking charts…
Oddly enough, this is exactly what caught my eye!
See, these stocks are very speculative and both spent most of the year disappointing every buyer – all the while, the market itself had been very strong.
Now, the market has semi crashed, panicked many people out, and have no doubt led to selling out of these highly speculative names.
For what it’s worth, over the past few weeks people have been scared to own AAPL and AMZN – much less so a meme stock.
So, sellers were out, buyers were fearful, and yet… for once, these names found support: GME at $100, AMC at $15.
What will happen if the market rebounds and some buyers do come back?
In the world of trading, the “Be greedy when others are fearful.” part is translated into “Buy the dip when nobody wants it.”
And that is what I did!
My GME and AMC Trades
Keeping in mind that if buying comes in, these names will pop, I alerted everyone to my entries in the Octagon.
The ideas were simple: GME should stay above $100:
And AMC should stay above $15:
As long as they did, I was very comfortable being in the trades, despite the fear on the street.
And, as you can see from the above charts, “Buying, when GME and AMC when nobody wanted” – has been working quite well!
I’m happy to brag that I’ve spent a lot of today’s session scaling out of my long positions – I hope you heard me on Monday, and it’s a happy Wednesday for you as well!
