There are plenty of traders who constantly root for a big crash.
Not me.
The market goes up over the long term, so I don’t want to go to bed every night betting against it.
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But yesterday was the worst post-midterm selloff since 1896. It got me thinking about what I’ll actually do if tech looks bearish for the next year (the way it did in 2022).
That year, the Nasdaq 100 lost about a third of its value. While it fell, I put money into a handful of tech stocks.
Looking back, I would’ve made more money if I’d just held these (and done nothing else)…
When the market has a big drawdown, too many people try to time the bottom.
If you’re thinking about buying this dip, it’s worth seeing what happened after every big Nasdaq drop since 2010.
Then I’ll show you how I’m planning to buy the next one.
Since 2010, Invesco QQQ Trust (NASDAQ: QQQ) has had thirteen big selloffs that started with a drop of 4% or more in one day.
If you bought QQQ at the open the next morning, you were up three months later in eight of those thirteen.
But the morning after wasn’t always the bottom. In some of them, QQQ kept falling first.
One of the biggest mistakes traders make is to buy something like ProShares UltraPro QQQ (NASDAQ: TQQQ) the morning after a big red day.
TQQQ is a fund built to move 3x as much as QQQ each day. I’ve traded TQQQ on dips myself, so I get the appeal. If QQQ bounces 5% in a day, TQQQ bounces about 15%.
Here’s how much more each fund fell after that next-morning buy in four of them:
- October 10, 2018: QQQ fell another 16.1%. TQQQ fell another 44.9%.
- February 27, 2020: QQQ fell another 17.0%. TQQQ fell another 52.8%.
- August 26, 2022: QQQ fell another 16.5%. TQQQ fell another 44.4%.
- April 3, 2025: QQQ fell another 8.2%. TQQQ fell another 23.9%.
I watched the COVID crash and the rebound live. Both funds finished green three months after that February 27 drop. But the TQQQ buyer had to sit through losing more than half of what he put in first.
So if tech gets destroyed, I won’t buy the crash with a 3x fund like TQQQ and sit through the drop. I’ll buy QQQ slowly instead, a little every trading day for about three months.
I may still trade TQQQ once the market stabilizes. But that’s a quick trade after the turn is confirmed, not something I hold through a crash.
Buying QQQ slowly doesn’t get me a better price. In some selloffs it beats buying all at once, and in some it doesn’t. I do it so no single morning carries the whole bet.
And I can wait. Since 2010, QQQ has almost always been higher a year after a big drop.
But it doesn’t always come back that fast. After the dot-com crash and 2008, QQQ took years to recover.
QQQ isn’t the only thing I’ll buy. I’ll also pick up a few individual stocks, the same small, slow way. But I want the strongest names.
Going into this week, three stocks were holding up while the rest of tech got crushed:
- Micron Technology, Inc. (NASDAQ: MU): It held up much better than other memory stocks like SanDisk and stayed well above its 200-day moving average. I’m waiting for a pullback that holds support, then a breakout on volume.
- Tesla, Inc. (NASDAQ: TSLA): It stayed above its 200-day moving average while most momentum names fell apart. I want it to hold its 10-day moving average and keep building higher.
- Federal National Mortgage Association (OTC: FNMA): It kept climbing while the market was weak. I’m waiting for it to consolidate and then break out again.
All three kept finding buyers while the stocks around them got sold. When the market finally bounces, stocks like these are usually the first ones I buy.
I’ll keep buying QQQ on the way down, and I’ll hold off on these until the market stabilizes.
I’m not calling a crash. One red day isn’t one. But if tech does get destroyed, I already know what I’m buying and how.
Make sure you catch all the live StocksToTrade events every week…
I know I’ll be watching.
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results