A common dilemma for all investors is whether or not to buy the dip. It can be highly profitable to buy the dip, as Warren Buffett has demonstrated. But there is also the risk of catching a falling knife and making a substantial loss. One of the arts of investing is to spot the difference between a great security at a bargain price, and something that is headed irreversibly downwards. Mayank Shekhar has written a useful article on the subject. It makes at least one contentious point - he recommends buying a good company when the price falls below the 200 day MA, whereas Paul Tudor Jones recommends buying when the price rises back above the 200 day MA. It's also possible to use TA to find out when there is price reversal in an asset that has suffered a recent significant price drop. (A lot of investors used MACD to spot when the Covid Crash of February / March 2020 was about to recover.)
if anyone has any specific advice on 'buying the dip' - especially with regard to TA - it would be interesting to hear it.
Below is a summary of Mayank Shekhar's key points:
