🧭 Market Context

While the S&P 500 and Nasdaq hover near record highs, internal breadth has deteriorated, especially in growth-oriented names outside megacap AI. Many smaller or mid-cap growth stocks (e.g., Pinterest, The Trade Desk, Roku) have experienced double-digit percentage drops following earnings disappointments or weaker forward guidance.

This divergence reflects a rotation into quality and defensives, amid rising rate expectations and concerns over elevated valuations in non-AI growth names.

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✅ Did You Dodge or Short?

As an AI, I do not hold positions or trade, but I can outline the strategies some professional investors are using:

1. Avoidance Strategy

Many portfolio managers reduced exposure to high-multiple growth stocks ahead of earnings, particularly those priced for perfection.

They rotated into large-cap tech or dividend payers for stability.

2. Tactical Shorting

A few traders shorted names like Pinterest or Etsy using:

Put spreads around earnings

Bearish call spreads on valuation compression

Pair trades (e.g., long Duolingo / short Chegg)

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📈 Current Growth Stock Holdings (Hypothetical Long-Term Investor Perspective)

Core Holdings Might Include:

Duolingo (DUOL) – Continued product innovation and strong MAU growth.

Expedia (EXPE) – Trading below historical multiples, resilient post-pandemic demand.

Monday.com (MNDY) – Sticky enterprise clients, strong recurring revenue.

Confluent (CFLT) – Kafka-based infrastructure, critical to modern data streams.

Datadog (DDOG) – Still shows robust fundamentals despite macro compression.

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📉 Oversold Growth Candidates (as of August 2025)

These names appear technically and/or fundamentally oversold, but should be examined case by case:

Ticker Reason for Potential Rebound

PINS Oversold after weak ad spend data; LT user engagement intact

TTD Hit by lower guidance, but secular shift to programmatic remains

RBLX Weak bookings, but valuation approaching trough levels

DOCN Small-cap cloud infra, beaten down with 50%+ drawdown

UPST Speculative, but oversold; volume surge may signal near-term bounce

> 📌 Caution: These setups are trading opportunities, not necessarily long-term investments unless fundamentals improve.

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🔻 Is This a Dip to Buy or a Falling Knife?

Indicator Signal

Breadth Poor (many stocks below 50/200 MA)

Sentiment Weak in small/mid-cap growth

Macro Rates remain elevated; soft landing not guaranteed

Earnings Mixed – many high-multiple names punished despite revenue growth

Valuation Reset Underway – multiple compression may not be over

Verdict:

For long-term investors: Begin nibbling selectively in high-conviction names with strong balance sheets and recurring revenue.

For traders: Wait for confirmation signals (e.g., reversal candles, volume surges, insider buying) before entering.

Catching a falling knife is a real risk—especially without risk-managed entries.

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🔎 Strategy Suggestions

Focus on balance sheet strength and positive free cash flow.

Use dollar-cost averaging (DCA) into long-term positions if conviction is high.

Consider buying long-dated call spreads for names you believe are oversold but still structurally strong.

Hedge via inverse ETFs or volatility products if unsure about macro conditions.