Everyone is waiting for market bottom & those who were caught off-guarded are feeling the pain. How to know when the market bottoms? How to navigate during such tough times? Is there a secret way to identify market bottoms?
Remember following:
Now, take a look at below Daily Nifty chart:
- NO, there are no secret, we just need to know where to look for a possible clue.
- There is no magical wand and NO pundit can forecast markets definitively all the time.
- Patience is needed and action is required when opportunity presents itself.
- Risk management and capital preservation should be highest priority.
Now, take a look at below Daily Nifty chart:
- Market did find support in the yellow shaded area for now as expected.
- Watch PPO indicator carefully and observe the dotted red line (near +5) and green line (near -5) - Any time market is near -5 then it tends to bottom and top when it is near +5, however we are looking at daily chart and this bottom should be considered as short term bottom and expect a possible bounce. We did get a bounce from end of March.
- But can this be considered as final bottom? For that we need to look at weekly chart.
Now, take a look at below Weekly Nifty chart:
- Market is near support zone which is shown by dotted line.
- Watch PPO indicator carefully and observe the dotted red line (near +10) and green line (near -10) - Any time market is near -10 then it tends to bottom and top when it is near +10. But this time we are looking at weekly chart. PPO is no where near -10 hence this may not be a major crash or bear market event.
- Now observe MACD, we need MACD blue line to cross over above red line to provide confirmation of market bottom.
Now, take a look at below Monthly Nifty chart:
- Anytime StockRSI is in oversold territory (below 20) can prove to be a good time for low risk entry
- Observe MACD, MACD blue line needs to stay above red line & now it appears to crossover, which is not a good sign.
- RSI is above 50 mark which is a good thing for now, especially if rally ignites again.
This should provide you with enough clues to identify a market bottom OR simply follow a simple rule. Get in when market moves above MA(100) and MA(100) is above MA(200) and rising.
Market is in correction mode and shall bottom soon...
Market is in correction mode and shall bottom soon...