Medium Term Trend: ↓Down (Changes to up above 10900)
Blood Bath Continues: After taking a breather yesterday Nifty once again tanked down. It closed with a massive loss of almost 900 points at 9500 levels.
Only positive point today was that markets somehow managed to save itself form a trading freeze. There is no point mentioning any support or resistance levels as markets are behaving irrationally for the short term (though its not making sense now, in some time it should start making total sense).
In last couple of post we had mentioned that this correction is definitely not a normal correction and if its a rare correction (seen once in 2-3 years) then it should complete around the current lows ( 10200-300) but if turns out into something which is extremely rare ( seen only once in 10-15 years) then we can fall all the way to 9500. Markets touched 9500 today and took just 2 days. Speed at which we are falling is mindboggling indeed.
Lets now try to make a sense of whats going in market and what could happen in the times to come. We recently (last posts) talked about how weekly RSI has fallen to 30 levels and in case this correction turns into something major then it can further drop to around 20 which translates to around 9500 nifty levels. Now though Nifty has turned 9500, the weekly rsi is still at 23 so we can fall a bit more (9000-9500 broadly is the range). Nifty has turned way too oversold so one bounce back is definitely pending now which can take nifty back to above 10K levels. After the bounce-back fizzle out probably we can fall again towards todays low and even more towards 9k levels.
Now lets take a step back and analyse Nifty on a larger time frame ( monthly charts). On Monthly charts, the RSI level is sitting at 37.6 today and last time such levels was seen on monthly charts was way back in 2008. In 2008 RSI had dropped to around 36 which again points to the fact that what we are seeing is an extremely rare event which happens only once in 10-15 years. Before 2008 we had seen such levels in 1999 ( dot com bubble/nasdaq crash) & 1992 ( harshad mehta scam). Evne though such falls are painful they always present good opportunity to long term investors.
Though we are positional traders and only talk about swing trading, this is one time where we must say that this is a time to stay away from trading but this is not the time to be scared or to be afraid. Agreed what we are seeing is exceptional but exceptional times offers exceptional opportunities. This is the time one should start investing in good quality stocks from long term perspective (5-7 years). If you look at charts carefully you can find many stocks which are available at very good prices at the same time there are some quality stocks which have hardly corrected those are the stocks to invest. Please dont pick up garbage stocks which are available cheaply as those may not recover when markets start recovering instead invest in good quality (index based preferably) stocks.
We all know what happened after 1993 , 2000 and 2008. Everytime market has shown these levels a new bull run has started afterwards. There are many who are saying that markets can fall to 6K levels,since in 2008 we had seen a 57% correction from top and in this fall, till now, we have just seen a correction of 25% so we can fall another 25% easily. While anything can happen in markets, we must understand that in 2008 markets were extremely leveraged so measuring correction with %age fall is not always the right methodology. Also note that monthly RSi didnt drop to <40 when Nifty fell to 4K, it touched 40 only when Nifty had made a bottom around 2.5K. Agreed after that markets spent nearly 6-7 months in 2008 at the same level before it started moving up. So same can repeat even now as well. Its possible that we spend rest of 2020 in 9-10K range ( just to frustrate investors) at the same time chances of a fast recovery is also there. Markets can go back to 12K levels even before you realise. Chances of both the scenarios playing out is 50-50 but like we said earlier, one thing is for sure, the levels we are seeing presents an extremely good opportunity to build a long term portfolio and invest in good quality stocks.
If you are not a leveraged trader, then you should not be see this as a threat but an opportunity.
Happy Trading ( or should I say investment).
Blood Bath Continues: After taking a breather yesterday Nifty once again tanked down. It closed with a massive loss of almost 900 points at 9500 levels.
Only positive point today was that markets somehow managed to save itself form a trading freeze. There is no point mentioning any support or resistance levels as markets are behaving irrationally for the short term (though its not making sense now, in some time it should start making total sense).
In last couple of post we had mentioned that this correction is definitely not a normal correction and if its a rare correction (seen once in 2-3 years) then it should complete around the current lows ( 10200-300) but if turns out into something which is extremely rare ( seen only once in 10-15 years) then we can fall all the way to 9500. Markets touched 9500 today and took just 2 days. Speed at which we are falling is mindboggling indeed.
Lets now try to make a sense of whats going in market and what could happen in the times to come. We recently (last posts) talked about how weekly RSI has fallen to 30 levels and in case this correction turns into something major then it can further drop to around 20 which translates to around 9500 nifty levels. Now though Nifty has turned 9500, the weekly rsi is still at 23 so we can fall a bit more (9000-9500 broadly is the range). Nifty has turned way too oversold so one bounce back is definitely pending now which can take nifty back to above 10K levels. After the bounce-back fizzle out probably we can fall again towards todays low and even more towards 9k levels.
Now lets take a step back and analyse Nifty on a larger time frame ( monthly charts). On Monthly charts, the RSI level is sitting at 37.6 today and last time such levels was seen on monthly charts was way back in 2008. In 2008 RSI had dropped to around 36 which again points to the fact that what we are seeing is an extremely rare event which happens only once in 10-15 years. Before 2008 we had seen such levels in 1999 ( dot com bubble/nasdaq crash) & 1992 ( harshad mehta scam). Evne though such falls are painful they always present good opportunity to long term investors.
Though we are positional traders and only talk about swing trading, this is one time where we must say that this is a time to stay away from trading but this is not the time to be scared or to be afraid. Agreed what we are seeing is exceptional but exceptional times offers exceptional opportunities. This is the time one should start investing in good quality stocks from long term perspective (5-7 years). If you look at charts carefully you can find many stocks which are available at very good prices at the same time there are some quality stocks which have hardly corrected those are the stocks to invest. Please dont pick up garbage stocks which are available cheaply as those may not recover when markets start recovering instead invest in good quality (index based preferably) stocks.
We all know what happened after 1993 , 2000 and 2008. Everytime market has shown these levels a new bull run has started afterwards. There are many who are saying that markets can fall to 6K levels,since in 2008 we had seen a 57% correction from top and in this fall, till now, we have just seen a correction of 25% so we can fall another 25% easily. While anything can happen in markets, we must understand that in 2008 markets were extremely leveraged so measuring correction with %age fall is not always the right methodology. Also note that monthly RSi didnt drop to <40 when Nifty fell to 4K, it touched 40 only when Nifty had made a bottom around 2.5K. Agreed after that markets spent nearly 6-7 months in 2008 at the same level before it started moving up. So same can repeat even now as well. Its possible that we spend rest of 2020 in 9-10K range ( just to frustrate investors) at the same time chances of a fast recovery is also there. Markets can go back to 12K levels even before you realise. Chances of both the scenarios playing out is 50-50 but like we said earlier, one thing is for sure, the levels we are seeing presents an extremely good opportunity to build a long term portfolio and invest in good quality stocks.
If you are not a leveraged trader, then you should not be see this as a threat but an opportunity.
Happy Trading ( or should I say investment).
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