How to catch that falling knife — a look at the iShares Expanded Tech-Software Sector ETF (IGV) . Here’s the quick answer: You don’t. When you see an ETF or a stock make a dramatic move to the downside, it is always tempting to dip your toe in the water hoping to buy at or near that low. The rapid 30% drop in IGV has set up that tempting scenario. News be damned. Everyone becomes a technician in a bear market. Traders who tend to shun the charts and rely on fundamentals rush to them and look to them for guidance. This move has become more emotional than logical and creates a great swing trade opportunity. When you get accelerated moves like this, you need to check historical price levels and momentum indicators. You never go all-in trying to get the bottom — that’s a fool’s game and can be painful very quickly. You want to set buy limits at various levels where the stock may hit a crescendo of selling and finally wash out. Let’s break down how to ease into the trade and what to expect on a snapback when it happens. The TLDR Nibble — don’t go all-in. Set limits on the way down between current levels and $77. Buy a little more at each level to dollar cost average in. If downside targets are met, we will be in an extreme oversold condition and have greater odds of a snapback rally. If we can get that reversal day where we go lower and close at the highs with the price back in the previous day’s range — buy more. Momentum is back. On a rally, don’t expect this to be a full V-bottom. Take quick profits as it heads back to $90. Watch that gap below $95 — that could become resistance. Expect a retest back to that level and lighten positions. The ETF is still broken, and the purpose of this trade to make a quick profit. If we break $75, pray to your god of choice and prepare to make this a longer-term trade. See below for a more in-depth technical checklist. Determine levels When the price goes into freefall, look at history and multiple time frames to be your guide. That’s why we look at the IGV on both a one-year and five-year time frame. Have we seen moves like this before? We sure have! Whether it was “Liberation Day,” Deep Seek or the Japan yen carry trade — we have had opportunities to catch quick moves. This time may be different, but the price action is giving us a new opportunity. On Wednesday, we had a huge volume spike and reversal to end the day. Maybe this is the bottom, but it doesn’t appear to be. When looking at price action over a longer time frame — the last five years — we see multiple V-bottom formations and two lows where the stock traded below $77. That also coincides with the most recent low. This $77 level looks like it is closer to the sweet spot and best risk/reward entry point. Will it get there? It may not, but I’d rather have buy limits set as it heads that way as it has held numerous times. A V-bottom? These are the toughest reversals to predict and very challenging to time. So, again you must ease in knowing you won’t get the exact bottom, but you will benefit from the meat of the swing trade. Usually, a flush out occurs when shares gap lower and have a major price reversal intraday and close near their daily highs. In the process, they form a bullish engulfing candle: a one-day candlestick that engulfs all of the price action from the prior session and closes near the highs. The ultimate support levels around $77 have yet to be tested, and we haven’t had that gap lower and big reversal either. We may want to nibble now, but it may be better to place lower limits around $80 and $77. Oversold conditions For this we use the relative strength index. An RSI reading under 30 is considered oversold and ripe to see things slow down and potentially turn. In this case, we look to historical levels and see that over the last five years — including the bear market of 2022 — things are extremely oversold. The true buy signal is when that RSI turns up and breaks above 30. However, given the historical level, it’s time to nibble. Support When we look back on multiple time frames we see support at just below $80, especially on the longer-term chart that shows buyers stepping in consistently. We also added the anchored volume-weighted average price, or VWAP, from its 2022 lows. The volume weighted price just happens to be at recent lows. This technical indicator has been a good friend to the swing trading community, and we tend to see support near these levels as well. The reward potential is outweighing the risk. The reversal When the reversal comes it should be fast and furious. Look for one final gap lower, a volume spike, and the price to reverse from daily lows to daily highs and form an engulfing candle. Maybe yesterday was the low but prepare for a better opportunity and don’t go all-in thinking it was. Ideally for this trade we get another gap lower and one last crescendo of selling. Upside targets should take price higher by one-third to a one-half of this current downward thrust. That gives upside targets in the upper $80 range, $90 and $95. If you think this will be another full V-bottom then you hold longer, but the point is to make a quick trade and take advantage of the oversold and possible irrational opportunity. — Jay Woods, CMT with Chase Games DISCLOSURES: Woods holds no position … yet. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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