Fed rate cuts are lighting a fire under a previously choppy market, but lingering uncertainty makes it critical for investors to know how to adapt when conditions change.
Eric Krull, co-author of "The Lifecycle Trade" and manager and founder of Krull Asset Management, tells Investor's Business Daily's "Investing with IBD" podcast the key to coping with different market cycles is to bend like a tree in the breeze.
Krull says he manages risk by sticking to his sell rules. He considers taking on smaller-than-normal positions when macroeconomic events like Fed rate decisions are on the horizon. Krull also carefully considers how the market is performing in the shorter term. Follow-through days are a good buy signal, but money management is crucial.
Audio Version Of Podcast Episode
AppLovin Climbs Despite Rising Risk
Several months after going public in 2021, mobile technology company AppLovin fell dramatically throughout 2022. The stock has since mounted a steady recovery. Its share price is hitting new all-time highs this week.
Krull says that in hindsight, it's clear that buying into the early breakout in AppLovin, on the breakout from the March 2023 base pattern, would have been advantageous. But such moves can be risky due to overhead resistance. That means traders who purchased the stock at higher prices create selling pressure as a stock rises and they sell into the rebound, trying to break even on their purchases.
It turns out that AppLovin impressively battled that overhead supply and has now surpassed what Krull calls the "turbulence zone." The turbulence zone is created by the stock's all-time highs after its post-IPO run-up. The stock is currently extended after triggering a buy point on Sept. 11.
AppLovin is currently ranked No. 1 in the Computer Software-Special Enterprise industry group and has a Composite Rating of 99 according to IBD Research.
Spotify Shines After Fed Rate Decision
Spotify stock made its market debut in 2018. The stock rebounded from lows in late 2022 and is steadily marching towards its all-time peak of 387.44 from 2021.
Krull argues the music streaming company is no longer in the due diligence phase, but in the institutional advance phase. He says he expects turbulence for the stock at prior all-time highs, but argues it could go even further.
Spotify surged along with the broader market following the Fed rate decision. The stock has a Composite Rating of 86 and is ranked No. 2 in the Computer Software-Education Media group of stocks according to IBD Research.
Shares of Spotify are currently in a buy zone from a consolidation with a 359.38 entry point.
Tap here to learn how to cope with wild market volatility.
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