Were you prepared for this sudden drop of such a huge magnitude!!! If not then its time to wake up and start understanding markets. Are you ready to get in?
Most people who simply read news or follow stocks and markets without understanding the intrinsic behavior and nature of markets are probably scared enough to stay out of market for a long time to come after such a dramatic drop in the market.
Let's analyze few things:
Check below Nifty daily chart:
Let's analyze few things:
- We expected the pullback but did not expect the magnitude and the speed at which everything unfolded. Most people were not prepared and when such dislocation happens usually margin calls are triggered causing further downside which is what we witnessed, also the uncertainty adds fuel to selling
- Everything in this Universe has a rhythm and same is true for markets too. Markets were stretched far above before the crash and now we see it get stretched far below (check weekly chart below)
- This is not the time to panic but rather time to look for excellent buying opportunities
- The recovery will not be V-shape but rather a slow churning process so we need to have patience
Check below Nifty daily chart:
- The last bar suggest we shall see some short term recovery bounce next week or 2-3 weeks probably up to 10700 area.
- We have significant resistance ahead which will not be overcome easily
- Let's not forget that this COVID-19 issue is not resolved yet and we might come back to test the lows in coming weeks/months ahead, expecting a probable double bottom in 6-8 weeks
Weekly Nifty chart below is providing better perspective:
- Rubber band effect is displayed by black arrows
- We shall see some bounce action for next couple weeks as all indicators are beyond oversold levels
- At these levels no one is left to sell anymore hence short term bottom might be in for now
So what constitutes fantastic buying opportunity?
Remember: (In this time of crisis)
Good luck and stay safe.
- When any system undergoes a sudden shock, many things get dislocated. In other words, the pullback or sell-off was overdone due to fear and panic and does not justify the low prices. Hence if you want to build a longer term portfolio then this is your buying opportunity, take it or leave it.
- A simple method: When market drops 10% then invest 10%, when it drops 20% then invest 20% of the remaining, if it drops 40% then invest 40% of the remaining amount and so forth. Do you calculations going back several decades and you shall see yourself the benefit of such a strategy.
- What should we buy? Simply invest in index ETFs or Mutual funds for now, another option would be invest in blue chip or Large cap companies but be careful as many global companies are affected due to supply chain issues.
- We expect another dip in next 6-8 weeks, based on what? If anyone is expecting that COVID-19 fears will vanish in one week then you are simply dreaming. The crisis has just began in western world and more is to come, which means more pain is ahead. So then why buy now? Let's wait n watch wouldn't be the prudent strategy! Well, yes you can wait n watch or start gearing up your plan, choice is yours.
- This crisis have potential to invoke mild recession unless something BIG comes up again, so be patient and Don't panic, rather have a plan so you have peace of mind.
- Above all, if you are too scared to get in the markets and need peace of mind, stay out of markets.
Remember: (In this time of crisis)
- Health is wealth, use commonsense and be logical
- Be kind to others, if you can help elderly please do
- Life is more important than money
- Don't live being scared and in panic mode, rather tell yourself everything will be fine soon
- For peace of mind, try to meditate (might help)
Good luck and stay safe.