Monday, September 22, 2008

Is the Bear Market over ?

Many readers are asking this question. The answer expected is : yes, it was completed on Thursday, Sept 18, when the Nifty touched 3800 support, then bounced back.
With some regret, I am unable to make a call on the end of the bear market. The Nifty seems to be back in the all too familiar trading range. This time it is the wider range between 3800 and 4650. The Index went down to touch the lower end of the range, then bounced back. But, the nature of the market remained the same - range bound.

At the same time, there is the possibility that the Nifty may have made a significant low around 3800 which it touched for the second time. We could well see the market stabilise around 3800, eventually leading to some base building, then to a new up trend.

My suggested course of action, then is:
Assume that a significant low has been made. Look to buy stocks on declines. (Only on declines). Keep such buying within limits (small volumes). Keep stop losses for ALL positions.
Expect the trading range to sustain, meaning resistance will come near 4650 or lower. Then, take profits on all buying if the Nifty moves up by 200/300 points or so from your buy levels.
Short selling ? When the Index gives sharp, sudden rallies, the chances are there will be a reversal. Professional Traders may like to short sell only on signs of weakness after big rallies.

A move below 3800 will suggest that this large trading range has broken down. Do not buy if this happens. (If the Nifty does fall below 3800, you should be stopped out much earlier! Pro traders are likely to be short. )

2 comments:

Jagdish said...

Bear markets are not over in 8 months. They only get over when the aam aadmi loathes stocks and wows never to invest in stocks. Right now, people yet want to bottom fish. Long way to go.

Deepak says sudershan is Best said...

So in this case market will go to 8000-9000 .Isn't it?

What do you think those people who invested there money at 18000-19000are going to invest in share market easily. who bought jp associates ,unitech @ 500 levels will again invest ...

I agree to you that 8 months is not the time frame but 11000-12000 should be the bottom.