Retail Traders Have Been Selling Tesla and Nvidia. What They’ve Been Buying Instead.
(Photo by CHRIS DELMAS/AFP via Getty Images)
AFP via Getty Images
Retail traders were taking a cautious approach by selling stocks like Tesla and Nvidia as the markets gained for a third consecutive day, opting against chasing the rally.
Retail traders—or investors directly buying shares of individual companies on trading platforms—were net sellers of crowd favorites Nvidia (ticker: NVDA) and Tesla (TSLA), with Sell orders outpacing Buy orders by ratios of 1.1:1 and 1.4:1, respectively. Retail investors veered toward Apple ( AAPL
), Advanced Micro Devices ( AMD
), and NIO Inc. (NIO), as well as the SPDR S&P 500 trust (SPY).
Tesla stock has gained 1.1% in early trading Friday, while Nvidia has gained 3.7%.
Retail investors chose to selectively sell or keep “a fairly balanced order book” as the markets closed on Thursday, said Nicholas Colas, co-founder of DataTrek Research.
Retail traders chose to selectively sell or keep “a fairly balanced order book” as the markets closed on Thursday, said Nicholas Colas, co-founder of DataTrek Research.
When the market is selling off steeply, buy orders can outnumber sells by a 2:1 ratio, and at times on a 3:1 ratio, Colas added, suggesting that retail investors are effectively executing a “buying the dip” strategy.
“When markets rebound, they don’t chase names on a third straight up day,” Colas wrote in a research note on Friday. “All that speaks to some basic level of risk management.”
The Dow Jones Industrial Average and the S&P 500 have both gained 3.5% over the last five days. The Nasdaq Composite was up 3.2%.
Retail trading has boomed since 2019, when most retail brokers reduced their commissions, wrote Nasdaq Chief Economist Phil Mackintosh. Activity nearly doubled when Covid hit in March 2020, with retail traders becoming, on aggregate, net buyers, he added.
Over the course of the last two years, retail investors have participated actively in the stock market, and have even driven its movements. In late 2021, retail investors helped boost stocks every time they briefly dipped.
But that boom may be gradually fizzling out. In recent days, only a little over 7% of trading volume for the 1,500 largest Russell 3000 stocks have been from retail orders, according to Morgan Stanley. Investors may be cashing out amid the market’s monthslong decline, driven by rising interest rates and the Ukraine-Russia war.
Write to Sabrina Escobar at [email protected]
