Market appears to be loosing its ground, Is the bullish advance over for now? Is this beginning of a further downside action in the markets!!! Lets see if charts are providing us any meaningful information...
Interesting turn of events can be observed in below chart:
- Nifty below MA(100), yet remains above MA(200) - suggests that its time to be very cautious
- McClellan Index remains below EMA(59), however it is flat - suggests that number of stocks advancing compared to declining remains in close proximity
Below chart is 2004 time period with very similar pattern, but observe how Nifty was moving around MA(100) and also watch McClellan Index which remains flat while Nifty was moving around MA(100), yet remaining below EMA(59). Market makes another unsuccessful attempt to move above MA(100) before taking a dive below MA(200).
Nifty is sitting right above MA(200) in below daily chart. A bounce is possible, however sustainability is questionable. If market drops below MA(200) then possible support areas are shown by black dotted lines.
Breakdown is visible in weekly Nifty chart below. RSI has dropped below 50 mark along with PPO dropping below zero mark.
Charts are telling us that a meltdown can be expected in near term, hence it is better to warrant caution. If you are a LONG LONG term player than no need to panic, simply ride it out. If you are short term player than its better to remain on the sidelines for now.
What does it mean for our Investments?
Market tide appears to be changing, remain very cautious....
What does it mean for our Investments?
- Mutual Funds - If already invested in equities then it might be decision time. Unless you want to ride the storm, its better to stay on the sidelines and even stop SIP for now. BUT if you have long term horizon then stay invested. If in cash/FDs/liquid funds then wait for market to stabilize.
- Stocks - ONLY invest in strong patterns with good earnings guidance and DO NOT forget to have STOP LIMIT on open positions. Check out our trade size calculator to manage your risk along with potential buy candidates watch list.
Market tide appears to be changing, remain very cautious....