Buying the Dip: Accenture After the 2018 Selloff
Accenture dropped 9% in early 2018 as VIX spikes and trade-war fears hit. With strong fundamentals intact, was this selloff a buying opportunity or a warning...
The Setup
What the world looked like at entry
Executive Summary
By early April 2018, Accenture had just experienced its worst quarter in years. The February VIX spike and March trade-war fears had slammed the stock from $162 to $147—a swift 9% decline. The question facing investors: was this a buying opportunity or the start of something worse?
The fundamentals hadn't changed. Digital transformation demand remained strong. Tax reform benefits were flowing through. But the tape was ugly, volume had spiked on the selloff, and fear was palpable.
This case study examines a "buy the dip" trade—entering after a sharp correction to test whether quality names recover quickly or continue lower. Would patience be rewarded, or was the market telling us something?
MACRO REGIME
- The Fed was hiking rates, having just raised in March 2018
- Trade tensions between U.S. and China were escalating with tariff announcements
- The February "Volmageddon" had shaken investor confidence
- Market volatility had spiked dramatically from 2017's calm
COMPANY SETUP
- ACN had dropped from ~$162 (January high) to ~$147 (March low)
- The selloff was broad-based, not company-specific
- No negative earnings surprises or guidance cuts
- The stock was testing support levels from late 2017
SECTOR MOMENTUM
- Tech and growth stocks had been hit hard in the correction
- Professional services less affected than pure tech
SENTIMENT
- Fear was elevated after the March selloff
- Institutional volume had surged during the decline (19.8M shares on the worst week)
- The question: dead cat bounce or real recovery?
Entry Point
The thesis and the position
A contrarian trader might have entered here seeing: - Quality company with unchanged fundamentals - Sharp selloff creating attractive entry point - Support holding near $147-150 zone - High volume capitulation suggesting exhaustion of selling The bear case: Trade war escalation, continued Fed tightening, or a broader market downturn could push the stock lower still.
Before continuing: Consider what you would have done. Would you have taken this entry? What risks would you have been most concerned about?
The Journey
From entry to exit
Apr 2, 2018
Entry near Q1 lows
Entry — Starting point
Apr 9-16, 2018
Initial bounce, stock climbs toward $153
Recovery — Positive early signs
Apr-May 2018
Steady grind higher, trade fears subside temporarily
Trend — Gradual gains
May 7-28, 2018
Breakout to $158.89, brief dip to $155
Breakout — Momentum building
Jun 4-11, 2018
Sharp rally to $163.48 (new high)
Rally — Peak of trade
Jun 18, 2018
Retracement to $159.63
Exit — Exit point
The Initial Bounce (Early April)
After the brutal March selloff, buyers emerged. The stock lifted from $147 toward $153 in the first two weeks—a quick 4% move that suggested the worst might be over. Volume remained elevated but was now buying rather than selling.
The Grind Higher (Mid-April to May)
With trade-war headlines fading temporarily and earnings season showing no damage, ACN methodically climbed. The $153-155 zone saw some consolidation, but higher lows formed. Confidence was returning.
The Breakout (Late May to Early June)
In late May, ACN broke above $158 and didn't look back. By early June, the stock had reclaimed its January highs at $163—a complete round trip. Volume surged on the breakout week (17.7M shares), confirming institutional participation.
The Pullback (Mid-June)
After hitting $163.48, the stock pulled back to $159.63 by exit. Some profit-taking after the sharp run was natural.
Price Action
The trade in chart form
Results
The final accounting
During the same period:
S&P 500 (SPY): Up approximately 4-5%
ACN vs. S&P 500: Outperformed by ~3-4%
Buying the dip paid off, both in absolute terms and relative to the market.
Lessons
What the trade revealed
Dip-buying can work—in quality names
The key is distinguishing between temporary dislocations and fundamental problems. ACN's selloff was macro-driven, not company-specific.
Volume tells a story
The massive volume on the March selloff suggested capitulation. When volume normalizes on subsequent days, it can signal the worst is over.
Define your exit criteria
An 8.3% gain is solid, but leaving 16% on the table (if exited at peak) shows the value of trailing stops or profit targets.
Compare to opportunity cost
Outperforming the S&P by 3-4% validated the active trade versus simply holding an index.
The scariest moments can be the best entries
Buying when headlines are worst often produces the best returns—if the fundamentals support it.