What seemed as a Nifty pullback a week back has turned into a correction as a reaction to Budget that was announced in past few days. But is this just another correction or trend change? Is there any way to figure this out!!!
Check out below slide show which includes 3 images:
What is the common theme here?
Topping pattern takes couple of months and only in hind sight you can determine the market has changed the trend. Hence it is not easy to spot trend change when it is happening but we can get clues based on below charts. However, its a probability and NOT a guarantee.
- 2013 Current Chart - Nifty crossed MA(100), McClellan Index has already crossed EMA(59) and MA(100)
- 2010-2011 - Nifty topped near 6200 area while McClellan Index was already in downtrend
- 2007-2008 - Nifty topped near 6300 area while McClellan Index started its downtrend
What is the common theme here?
Topping pattern takes couple of months and only in hind sight you can determine the market has changed the trend. Hence it is not easy to spot trend change when it is happening but we can get clues based on below charts. However, its a probability and NOT a guarantee.
Nifty pullback has turned into a correction due to budget announcement. Next support area is near 5600 level where coincidentally MA(200) line may lend some support as well.
On weekly Nifty chart, we can see possible support area near 5600 level. Expect a bounce attempt at these levels.
We did mention in an article posted few weeks back regarding choosing ELSS funds as well as Mutual Funds, about where the market is headed in 2013. Based on that as well as what we are seeing now, it appears that market shall experience topping pattern for next few months. Remember, its just a possibility and markets do what it wants causing maximum pain to all.
What does it mean for our Investments?
Market in correction mode, stay alert...
What does it mean for our Investments?
- Mutual Funds - Market appears to be in correction and shall soon attempt a bounce, based on the bounce attempt we can determine if we shall remain invested or exit the markets. Ideally when market crosses MA(100) and McClellan index is below EMA(59), we consider it as our SELL signal BUT no need to rush.
- Stocks - It is wise NOT initiate new positions as market appears to be in correction and most stocks will experience a drag. Make sure you have STOP LIMIT on existing open positions to capture gains if stock slides below your STOP level.
Market in correction mode, stay alert...