To The Moon

If we looked at how the market have behaved over the past week, and Monday (10 Mar) we experienced a selloff which could be seen as a meltdown. One of the indicators I feel that we should be looking is the Volatility Index (VIX).

It is often called the "fear gauge," measures the market’s expectation of 30-day volatility in the S&P 500. While it is not a direct predictor of stock prices, it reflects investor sentiment and risk appetite.

In this article I would like to examine how we can use the VIX to inform our trading decisions in high-quality stocks (e.g., blue chips, stable dividend payers, or fundamentally strong companies). I am focusing on fundamentally strong companies which has shown resilience in the recent selloff.

Understanding VIX Levels

Currently the $Cboe Volatility Index(VIX)$ is above 27 which signal market is experiencing high volatility and fear, there are panic selling as seen in last night trading, and there is a potential market bottoms.

So as investors, I think there is still some opportunities that we could seize, I also feel that there is a sector rotation away from the tech stocks.

VIX < 15: Indicates low volatility and complacency (investors are optimistic, markets are calm).

VIX 15–25: Normal/moderate volatility (typical range during stable markets).

VIX > 25: Signals high volatility/fear (panic selling, potential market bottoms).

VIX > 40: Extreme fear (rare, often during crises like 2008 or 2020).

Contrarian Strategy: Buy Fear, Sell Greed

High VIX (Fear): When the VIX spikes (e.g., >30), investors panic, and quality stocks may be oversold.

Action: Look for undervalued opportunities in strong companies with solid fundamentals (e.g., low debt, consistent earnings, strong cash flow).

Example: During the COVID-19 crash (VIX hit 85), stocks like Microsoft or Apple dipped sharply but rebounded strongly as fear subsided.

Low VIX (Complacency): When the VIX is low (e.g., <15), markets may be overextended.

Action: Consider trimming positions in overvalued stocks or hedging with options.

Past Recent Events Which We Can Learn From

• 2020 COVID Crash:

  VIX surged to 85 (March 2020). Investors who bought quality stocks (e.g., Amazon, J&J) during the panic saw significant gains as markets recovered.

• 2023 Banking Crisis:

  VIX spiked to 30 (March 2023). Defensive stocks like Procter & Gamble (PG) outperformed.

VIX and Mean Reversion

The VIX tends to revert to its long-term average (~19).

• High VIX: Likely to fall back, signaling a potential market rebound.

• Low VIX: Likely to rise, signaling a potential correction.

Combine with technical analysis (e.g., RSI, moving averages) to time entries in quality stocks.

How Pairing VIX with Sector Analysis Works

• In high-VIX environments, defensive sectors (utilities, healthcare, consumer staples) often outperform.

• In low-VIX environments, cyclical sectors (tech, industrials) may thrive.

This is why I am looking at these quality stocks which has demonstrated good fundamental amidst the recent selloff and meltdown.

Grab (GRAB) Long Term $6 Dollars Possible

If we looked at how $Grab Holdings(GRAB)$ have been holding out during the recent sell off, there is pretty decent valuation for Grab at around $4, which it last closed on Monday (10 Mar) at $4.12.

From the technical on the weekly chart, we can see that it is defending the 50-day period and seeking for some uptrend expansion, I have a position in Grab and is holding the position, will continue to add if it go near my price around $3.40.

I am looking for Grab to hit $6 to $8 over the next three to nine months. As we can see from the RSI it is in the downward movement towards the oversold region.

Nike (NKE)

$Nike(NKE)$ is in a good recovery path as we are seeing that for the past few quarters, NKE did recover from its bottoms. But the current price is actually near its 2018 price.

We are now looking at a weekly engulfing move as it look for higher lows and also trend expansion out of the support range (12-EMA, 26-EMA). We might even see NKE hitting $90 to $100 in the next 6 to 9 months.

But we need to understand that this could a longer than expected recovery but for the long term, Nike is one of the high quality stock which I would add to my portfolio as we see its turnaround.

United Parcel Service (UPS)

Another consumer facing stock which I would look at as part of the value rotation, is $United Parcel Service Inc(UPS)$. We can see that value rotation is in play in the last 4-5 weeks since $SPDR S&P 500 ETF Trust(SPY)$ and $Invesco QQQ(QQQ)$ have been selling off.

We saw UPS recovering after their earnings exceed expectations and UPS pay 5.4% dividend, we can see that they have managed to hold out the price accumulation range bouncing out of it now.

If there is a rotation from growth to value, we will need to find a high paying high quality dividend stock, which is also in its cyclical bottoming out process, this makes UPS an attractive play to me.

Other things to watch is UPS valuation, free cash flow and dividend yield have been fantastic. The price to earnings growth in the future is looking quite good as well. We are seeing UPS clearing 12-EMA, and RSI is also looking to rise with much better momentum.

Summary

I think VIX could be a powerful sentiment tool, but we might need to pair it with fundamental analysis of individual stocks and broader market trends.

High-quality stocks tend to weather volatility better and recover faster, making them ideal candidates for a VIX-driven strategy. We as investors should always prioritize risk management (stop-losses, position sizing) to avoid overexposure.

Appreciate if you could share your thoughts in the comment section whether you think these consumer facing stocks would be a good choice to weather volatility.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.