Without any doubt, market is currently in correction mode. BUT was market able to find support? Will this end the correction!!!
Below is giving us subtle clues:
- Nifty is trying to find support near MA(200) - Market is below MA(100) hence caution is warranted
- McClellan Index is below EMA(59), however take a closer look and it appears to be moving up! - Remain cautious as we are by no means out of the woods yet
Now, lets take a look back in history, a period between April 2004 and September 2004. Take a look at McClellan Index which has dropped significantly and then appears to be recovering by moving upwards only to fall further. Now look at Nifty in the same period which drops below MA(200) and struggles for several months before starting the BULL trend which becomes smooth as McClellan Index crosses EMA(59) and decisively changes the trend.
After making NEW HIGH in early March, Nifty entered into pullback which got extended into correction. Now market is near 8100 area around MA(200) which can be perfect support area. A bounce can be expected here, however MA(50) above will act as possible resistance.
Weekly chart clearly displays possible support areas. Also RSI has NOT yet visited oversold area and it is very highly likely that after the bounce attempt is over, market will be dragged down to 7800 area. MACD is falling and PPO is below zero mark.
History is telling us that be prepared in an event if market drops further but that does not necessarily mean it will happen exactly the same way. Remember, history often repeats itself BUT NOT in identical pattern. Current charts are telling us that in short term we can expect a bounce, however the bounce may not last for long and market will drop down further possibly to 7800 or even 7200 area, hence its better to remain extremely cautious than be complacent.
What does it mean for our Investments?
Market remains 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 which could take a while, 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, NO need to hurry.
- 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 remains in correction stay on sidelines...