For example, it is not uncommon for the price of crude oil to decline sharply after OPEC meets.
In addition, a dip can happen when there is a major news event surrounding a company or an asset. The stock tumbled by more than 65% from its highest level in 2020. A good example of this is when the Alibaba share price declined sharply as China intensified its crackdown on technology companies. Regulatory changeįourth, a dip can happen because of regulatory changes. For example, stocks used to decline sharply when Trump started his trade war with China. Third, a major geopolitical issue can lead to a dip in an asset. In it, the index declined sharply when the Fed started ending its quantitative easing program. For example, the Dow Jones has declined several times when the Fed turns hawkish.Ī good example of this is the so-called taper tantrum. Second, a dip can happen because of a major policy change by the Federal Reserve. However, the stock crashed because the company’s guidance was relatively weak. This happened even though the company’s results were better than expected. The stock declined by more than 40% in a single session in December 2021. First, a stock could decline sharply if a company publishes weak quarterly results.Ī good example is shown in the DocuSign stock below. There are several key causes of dips in the market. Most brokers have it as a simple option, where you can sell the rip instantly without going through that process. Therefore, sell the rip is defined as a period when a trader or investor decides to short an asset that has declined sharply.įor starters, shorting is a concept where you borrow shares, convert them into cash, and then sell them back when the price falls. Finally, they can understand the risks involved in buying the dip or selling the rip and stay away from the asset.They can decide to short the asset and benefit as its price declines.They can decide to come back in and buy the asset.When the asset declines that much, traders have three options: It can refer to a period where it declines sharply in a single day or when it declines within a long period of time. Final thoughts: Should you sell the rip or not?Ī dip in the financial market refers to a period when a stock, commodity, cryptocurrency or any other asset declines sharply.
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