Retail Traders Stick to Their Dip-Buying Ways, But Fatigue Lurks

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(Bloomberg) — Retail investors bought into the biggest selloff of technology shares since May on Tuesday, targeting heavyweights like Apple Inc. and Microsoft Corp.

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Day traders snatched up $1.9 billion worth of equities Tuesday, among the five-largest net buying days since the pandemic began, according to data compiled by Vanda Securities Pte. Individual investors flocked to tech heavyweights that have been hit the hardest, while selling the rallies in reopening industries like airlines, the data show.

The buying spree from retail investors is the continuation of a trend where purchases have been more notable during market routs, while they broadly sit out buying on days when the market moves sideways. That suggests retail is “not particularly thrilled about stocks right now, and only feel tempted to buy dips if there is a substantial discount,” wrote Vanda’s Ben Onatibia and Giacomo Pierantoni.

That behavior paired with systematic strategies from commodity trading advisers and volatility-targeted funds help to “explain the severity of the last two drawdowns,” the analysts said.

The more volatile ProShares UltraPro QQQ exchange-traded fund (ticker TQQQ) was Tuesday’s top buy on Fidelity’s platform with more than 11,000 buy orders from customers. Apple, Microsoft, and Nvidia Corp. were among stocks with more than 8,000 purchases as all three slumped at least 2.4% each on Tuesday.

U.S. equity markets rebounded Wednesday morning led by the digital-heavy Nasdaq 100 Index which jumped 0.7% at 8:22 a.m. in New York.

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