Is it now time to buy shares or should you run for the hills?


In recent months both the Australian and US tech sectors have been falling heavily. From August last year until two weeks ago, the Australian tech sector has fallen nearly 40%, while the US technology sector is down more than 20% as of a few days ago.

While these falls indicate that the technology sector in both countries has crashed, is it now time to buy or should you run for the hills?

It's important to understand that just because one sector has crashed doesn't mean that the overall market has crashed or will crash.

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In Australia, the technology sector fell 29% between January 1 and February 24, which would be considered a crash, while the All-Ordinaries Index has only fallen 4.41% for the year to date. From 1 January to March 14, the US technology sector fell over 19%, while the Dow is only down 6.26% and the S&P500 is down 8.57% for the year.

The Australian stocks hit hardest since January 1 include Dubber and Praemium, which are both down around 50%. Of the larger stocks, Appen is down 37%, Xero is down 29% while Altium is down 27%. So has the Australian tech sector bottomed and is it time to look at these stocks for an opportunity to buy?

This week the technology sector in Australia has risen over 6%, which indicates that it has likely bottomed or at the very least shown that the six-month downturn is very near its bottom. Given this, I recommend investors start to look at the tech sector with a view to entering some great stocks at very good prices.

That said, don't blindly jump into any stock hoping to get in early, as you need to wait for confirmation that the stock has stopped falling. While the US tech sector has also risen strongly this week, investors would be wise not to jump in too early trying to grab a bargain, as it is yet to show signs that it has stopped falling.

The best and worst performing sectors this week

The best performing sectors include Information Technology up over 6% followed by Financials up over 5% and Healthcare up over 5%. The worst performing sectors include Materials and Energy, which are both down over 2% followed by Utilities, which is just in the red.

The best performers in the S&P/ASX top 100 stocks include REA Group up over 11% followed by SEEK up over 10% and Orica and Aristocrat Leisure, which are both up over 9%. The worst performing stocks include IGO down over 6% followed by Lynas Rare Earths down over 5% and Woodside Petroleum down over 4%.

What's next for the Australian stock market 

The All Ordinaries Index has shown some resilience this week and in a good sign has risen to its highest level in the last four weeks. While it is still too early to confirm if the market has bottomed and will start to rise, it is getting very close to that point. As such, I encourage everyone to remain patient until we see confirmation, as the streets are littered with losses from those who are impatient.

We still need to see the market rise above the high of 7646 points before we can be confident it will move in a sustained uptrend. If the market falls away next week, it is still possible that the last few weeks have just been a pause in the downtrend. For those who remain patient and cashed up, you will be rewarded with some high-quality low risk trades in the not too distant future.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.
Rhett Jeffery
March 19, 2022 2.23pm

Thank you for article Dale. The clear flaw you didn't address however are the perils of "timing the market" which is exactly what you are suggesting investors do. There has been a lot of research concluding the most skilled (and resourced) investors are not able to time the market, so why guide novices in this direction?