2024 was a monster year for the stock market. And hedge fund manager Jim Roppel is optimistic that 2025 can deliver another year of strong gains for investors as the AI revolution powers forward and a more business friendly administration moves into the White House.
But he warns that froth in the current market could cause some road bumps ahead. “The short-term indicators have become very muddy and negative,” Roppel said.
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Get Ready To Outperform In 2025 With These Key Rules From Jim Roppel
“I’m slightly cautious short-term. But I think next year is going to be a monster stock picker’s market.”
Stock Market 2025: Focus On Leaders
2025 will be a year to concentrate on leading stocks, says Roppel.
“I am bullish for the year,” the hedge manager said. “But I think that we’re going to have a tougher time with less wind in our sails. So the individual stock picker is going to rise to the top.”
Two leading stocks on Roppel’s radar include Magnificent Seven standouts Nvidia (NVDA) and Tesla (TSLA).
Nvidia stock has built a new base with a buy point of 146.54. But shares have met with resistance at the 50-day moving average and are trading below that key level, according to MarketSurge.
However, Roppel is encouraged by Nvidia stock’s tight trading action in the turbulent market environment.
He explained that a move above the 50-day line could give the AI behemoth some momentum to the upside.
“Nvidia could light up the tape,” Roppel said. “Now, if it breaks down to the downside, that’s going to be just as negative. But with the market this ugly, it’s not allowing things to come out right now. But that is a big signal to me.”
Another name on Roppel’s radar is EV maker Tesla.
“Tesla to me is likely to be an absolute star next year,” Roppel said.
Tesla stock is on a huge run since Donald Trump’s election win, as investors speculate that the new administration will clear the regulatory path for autonomous vehicles.
On Nov. 6, Tesla stock gapped up above an alternate handle buy point of 273.54 but was quickly extended. Shares have been consolidating since peaking at 488.54 on Dec. 12, ending 2024 on a four-day losing streak
The hedge fund manager explained that weak technical action had made him bearish on Tesla over the last few years. But he sees some positive signals developing.
“Institutions are gobbling this thing up,” Roppel said of Tesla stock. “Next year this has got to be on the hit parade list.”
Use Hedging Strategies To Hold Potential Winners
How can investors handle potential long-term winners that are struggling in the current market? That’s where hedging strategies could be useful, Roppel explains.
“Hedging has become a really big tool in my tool kit,” Roppel said. “If you have a stock that you love, like I love Cava (CAVA), but it is living in the no-go zone, this for me must remain a max hedge position until it gets back above the 50-day line.”
He explained that having a low cost-basis helps him hold potential long-term winners during pullbacks and base building. That includes buying at a strong entry point and building a considerable profit cushion.
Roppel likes hedging his individual stock positions with options. If traders are unfamiliar with options, some popular individual stocks have inverse ETFs that can be used as a hedge. Inverse index ETFs are another option to consider.
And if hedging isn’t for you – you can always lighten up your positions by trimming back your holdings.
Roppel’s Buying Windows
Roppel also explained his approach to buying windows in difficult market conditions to help investors protect their hard earned gains.
“When the market is below the 50-day, your buying window is shut,” Roppel said. He added that investors can look for an upside reversal or follow-through day as a signal to reengage in the market.
Another Roppel rule? “If the market is above the 50-day line by its historical average for the last year or two, close the buying window,” he said.
“If you’re buying when the market is that extended, you’re gambling that it’s going to extend into a historically higher level than it has,” Roppel said. “Just cool it.”
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