Finally, the much awaited market breakdown happened as expected. But the key thing to remember is that we got plenty of advance notice, Isn't it!!! Now everyone would be wondering, what is the maximum pain we might get in coming period!!!
Notable changes in below chart:
- Nifty dropped below MA(200) - This is NOT a good sign and could lead to further damage
- McClellan Index is flat but below EMA(59) while both EMA(59) and MA(100) are in downtrend - NOT very encouraging
Daily Nifty chart shows us that market could NOT hold onto MA(200) and now trying to find support near 8100 area. It will not be a surprise if we get a bounce at these levels, however sustaining the bounce will be very difficult considering all the resistance ahead. Next support is near 7800 area which might prove to be strong support area.
Divergences visible on weekly chart have come to fruition, but see how much time it took for market to finally drop after the divergences were visible. Hence simply trading based on divergences can be very dangerous as there is NO set formula. RSI has dropped below 50 mark along with PPO dropping below zero mark.
Now that correction is underway as expected, its best to remain on the sidelines especially if you are NOT invested in the market. However, if you are still invested and want to continue for long haul then no worries, just be prepared to take more pain, this market can drop further to 7600-7800 area where it might stabilize but this will take months to materialize. At that point it will offer an extra-ordinary opportunity of lifetime to embark on a MAJOR BULL market based on past data. Patience is required along with discipline.
What does it mean for our Investments?
Market is in correction stay on sidelines...
What does it mean for our Investments?
- Mutual Funds - If still invested in equities then you probably don't have a choice but to stay invested and ride the correction, be patient. But it would be wise to STOP SIP for now until market stabilizes. If in cash/FDs/liquid funds then wait for next robust opportunity.
- 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 is in correction stay on sidelines...