Should We Start Catching “Falling Knives?”

Catching falling knives has become a profitable activity. [Jeff Clark's Market Minute]( Should We Start Catching “Falling Knives?” By Jeff Clark, editor, Market Minute Catching falling knives has become a profitable activity. It’s a strange thing, really. For most of the past 40 years, traders have been advised to avoid trying to catch falling knives. Stocks that drop sharply overnight, like a falling knife, tend to drop even more in the days that follow. So, the smart thing has always been to step out of the way. Avoid the temptation to try to catch the knife. And, save your portfolio from getting sliced. Recommended Link [Jeff Bezos’s Plan Exposed]( [image]( Located 30 miles from Baltimore — Jeff Bezos has been quietly investing in one tiny company that’s ground zero of a technology revolution that’s going to change everything. Bank of America said the technology would be, “Bigger than fire and bigger than all the revolutions that humanity has seen.” [And for investors who get in now profits could be massive — click here for full story.]( -- Avoid These Sharp Falls The action in Adobe Systems (ADBE) earlier this year provides a good example… [Image] The two red arrows on the chart point to obvious “falling knife” events. While ADBE shares bounced briefly after each of those events, the stock went on to slice even lower – thereby cutting up the folks who attempted to catch them. That is what typically happens. That’s why there’s an old Wall Street saying that goes, “Don’t try to catch a falling knife.” Now though, something curious is happening… Look at the chart of ADBE again and notice the sharp drop at the end of May. Surely that overnight decline of nearly 9% qualifies as a falling knife, doesn’t it? But look at what happened next… [Image] Catching that falling knife at the end of May would have generated huge profits in June. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Keep Track of Evolving Patterns Of course, we could argue this was the exception that proves the rule. ADBE had been falling all year. The falling knife at the end of May was duller than the previous falls. So, it was “safer” to try to catch it. Okay, for arguments sake, let’s agree with that premise. But, how do we explain these “knives”… [Image] [Image] [Image] Granted, these are only a few examples. And nobody is going to argue that rushing in to buy stocks that have fallen dramatically overnight is a “safe” way to invest. But the stock market does evolve. Patterns that used to play out all the time tend to lose their consistency. Heck, just look at the old adage, “Sell in May and go away.” That’s not working out so well this year, is it? So maybe, just maybe, trying to catch a falling knife might be less dangerous today than it was a few months ago. After all, the market does seem to be evolving. Traders should keep an eye on this possible trend change in the months to come. Best regards and good trading, [Signature] Jeff Clark Editor, Market Minute [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2024 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](