Why Xero, Afterpay shares rebounded 6% yesterday

Find out why Xero Ltd (ASX: XRO) and Afterpay Ltd (ASX: APT) shares surged higher yesterday as the S&P/ASX 200 (INDEXASX: XJO) bounced back.

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Xero Limited (ASX: XRO) and Afterpay Ltd (ASX: APT) were amongst the S&P/ASX 200 (INDEXASX: XJO) shares to bounce back strongly on Monday.

The two ASX tech share prices surged more than 5% higher as investors rushed to put their money back into the market after a week of heavy losses.

Why Xero and Afterpay shares bounced back on Monday

There were no news announcements from either of the WAAAX tech shares but that didn't stop the share price gains. Afterpay shares closed 7.06% higher at $29.58 per share. While the buy now, pay later leader remains under the $30 barrier, investors seem to think the group could be undervalued at that mark.

Afterpay's market cap is now $7.83 billion having topped more than $10 billion in February 2020. It's worth remembering that long-term investors are still well up on their Afterpay investment. Afterpay shares are up more than 140% since early 2019, and more than 300% since early 2018.

It was a similar story for Xero shares which closed 6.25% higher at $75.86. In my mind, Xero looks to be the most stable of the WAAAX shares right now. While other valuations have been hit hard in recent months, the accounting software provider has largely held its value. Incredibly, Xero shares have actually climbed higher since the end of last week despite the ASX 200 carnage.

Investors have been keen to pile back into these 2 ASX 200 tech shares this week. This morning will make for interesting watching on the ASX 200 to see if investors' fear has subsided. Despite some panic selling, I think there will be many institutional investors waiting to buy up good companies on the cheap.

Foolish takeaway

Yesterday's rebound goes to show why market timing is so difficult to do. If you happened to sell out on Monday in the big crash, you would have missed out on the potential upside from Tuesday and be in a worse position.

That's why I like to stick with a buy and hold strategy to ignore the market noise, particularly when it comes to high-growth options like Xero or Afterpay shares.

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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