Market finally broke the support near 7500 area which we were expecting for many months now. BUT how far down will this market go? How do we know when it will turn around? What should we look for!!! Can answer these questions on your own?
Market could not manage to break through MA(100), instead MA(100) acted as a resistance and market dropped to new lows. McClellan Index did manage to stay above EMA(59) for now but can it sustain to remain above it!!!
Clear breakdown of support near 7500 area is visible in daily chart below. This support will become resistance next time when market tries to move above it if it is not able to get above it quickly.
Weekly chart remains decisively bearish with market breaking down support level and heading towards 7200 area. Take a look at RSI and PPO, both could not penetrate the dotted trend line, both are in not showing any sign of divergences. Same is the case with MACD.
Speculation charts are shown below:
- 2015 June
- 2016 January
Overall market is bearish, but the key question is how far below this can go?
What does it mean for our Investments for now?
Market firmly bearish, get out of the way.
- Next support is near 7200 area which we believe is easily achievable
- However in a complete panic moment, this market can touch 6200-6800 area, which in turn might become the ultimate BUY opportunity, BUT WHY? At that point, panic will already be visible and no one would want to touch the markets. This is precisely the kind of opportunity a long term investor should look for to buy blue chip companies such as listed in Nifty 50 index or Sensex index. But why won't the markets drop below that level? They can, however that level has a significant strong support
- The key is to look for right indicators which will tell us that this market is turning around. Market needs to show some strength which can be identified from McClellan Index (early sign) followed by moving above MA(100) which will be our confirmation
- Use this time to research and identify potential candidates which can be next winners once the bottom is in
What does it mean for our Investments for now?
- Mutual Funds - If still invested in equities then time to hold onto this roller coaster ride, exiting now will be very expensive and painful. No need to rush to start SIP unless we get positive trend reversal sign. If in cash/ FDs/ liquid funds then it is wise to stay on sidelines.
- Stocks - ONLY invest in strong patterns with good earnings guidance and DO NOT forget to have STOP LIMIT on open positions. When market is in correction, it will drag everything down with it. Check out our trade size calculator to manage your risk along with potential buy candidates watch list.
Market firmly bearish, get out of the way.