After bouncing briefly, Market has continued its down trend which we were expecting. We believe readers of this blog were not surprised, rather they probably understand market behavior and are well informed to make intelligent investment decisions going forward. Lets take a look at this weeks chart...
Market well below MA(100) and MA(200) suggesting full blown correction which can turn into bear market. Time to stay away from the market for short term investors. However, McClellan Index has slightly moved above EMA(59) and MA(100) suggesting possible change in trend which means more stocks are advancing than declining in cumulative manner, however market does not appear to react to it for now.
Below chart is providing a new piece of information known as "Death Cross" which happens when a longer term MA crosses shorter term MA, in this case MA(200) crossing MA(50). Next support for the market is near 7800 area which shall provide a stronger bounce, however do not get fooled by the bounce. The bounce may not last beyond 8100 area as that will be new resistance for the market going forward.
Not much has changed on weekly Nifty chart, we can clearly see the broken support. We speculate that market will drop to 7800 area and bounce back close to 8100 area only to dive further to 7200 area. RSI is barely in oversold territory which means further downside is probable. MACD and PPO are clearly in down trend. Lets see how this plays out...
The Head-Shoulder pattern mentioned in last weeks post appears to have been completed, hence we can expect further downside. Be prepared for a roller coaster ride for several months ahead.
What does it mean for our Investments?
Market in correction mode...
What does it mean for our Investments?
- Mutual Funds - If still invested in equities then 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 in correction mode...