You wake up and see the stock on your watchlist suddenly spike up north & wish you had bought in when you had the chance, you then tell yourself maybe not a bad idea to get on the momentum train only to goes south after you buy in, sound familiar ? So hold it – better to dogde a bullet than bite it !! Before you relent to that painful FOMO, here are some pointers to ‘take stock’ of the situation first. Even if you do not take any action, just thinking through this process and making an informed decision for inaction will still help with FOMO-algia:
1. What is reason for the rally, does this flight have any real wings. Do you identify any bull continuation patterns on the charts ? RSI not oversold yet ? MACD oscillator / ADX indicator shows an uptrend ? Market cap still low compared to the potential value of the news triggering the spike ? Then maybe add a few shares for the ride but always add a stop loss order.
2. If the rally is fueled by promise, hype or a meme, one good way to still have one foot in the game is to consider buying a few cheap puts. Anything that goes up quick usually has a good chance of coming down, but may need time ! Reality punches harder than a promise, like I have covered before, if the rally is just a promise, it has a good chance of eventually falling back close to SMA 50 / SMA 200 levels. This way even if you missed the upswing, there is still money be made on the downswing once the euphoria wanes and people stampede into profit-taking. Puts are cheap to buy on the way up. I usally get a few puts dated after an upcoming hype-event, or at least a month away and target a little above the SMA 50 or SMA 200 whichever is higher or wait for a reversal pattern on the charts.
3. If you already had some stock and kicking yourself for not buying more, sell covered calls instead on your current position to still make free $$$.(Of course you can only do so if you own at least a 100 share or in multiples of 100). If you are almost at 100 shares and its a stock you dont mind owning long term, then buy a few more to round it to 100 and sell a higher covered call while the stock is still rallying
