As expected, market started its pullback based on "mega phone pattern" mentioned in last two weeks blog post. This should not be a surprise to us. However, how severe this pullback becomes remains to be seen...
Nothing changed in below chart so far and all signs continue to be bullish.
The dotted line shows "Mega Phone Pattern" and market appears to have broken the MA(50) support for now. Market has potential to drop further towards 7300-7400 area considering current geo-political tensions unless it gets back above MA(50) quickly.
On weekly chart, Nifty is barely hanging onto WMA(10) support but the probability of NOT holding the support is highly probable. A shakeout drop can take this market near 6800-7200 area, if that range is broken decisively then the NEW BULL market is in serious danger.
Every new MEGA BULL market starts with a shakeout...
What does it mean for our Investments?
Market appears stuck in a range for now...
- What is the basis of above statement? - Check our market period between 2003 to 2005
- That is just one instance and we cannot conclude based on one case! - Alright, go and check Dow Jones Industrial period between 1983-1985
- BUT who said we are in a MEGA BULL market? - Now that's a million dollar question, we will ONLY know it in the hind sight and by then the opportunity is lost
- What if market continues to rise without a shakeout! - It is always a possibility, however at some point we shall get the shakeout no matter what! Its only matter of time...
What does it mean for our Investments?
- Mutual Funds - Stay put if invested in equities but DO NOT open NEW positions unless market can get above MA(50) line. No need to stop SIP as we do not have trend reversal confirmation. If in cash/liquid funds/FDs then stay put and wait for the next low risk opportunity. If market reverses and gets above WMA(10) on weekly chart then that would signal low risk entry.
- Stocks - ONLY invest in strong patterns and DO NOT forget to have STOP LIMIT for all open positions. Check out our trade size calculator to manage risk on individual positions.
Market appears stuck in a range for now...