Readers are going to find the title of this post, amusing. The last post said rather boldly - "Enjoy This Bear Market Rally". Now, today, I am talking about a bull market.
The reason is that every market has an inflection point (A moment of dramatic change), the point at which a market stage ends, and, a new market stage begins.
Now a bull market begins with a lot of base building. When the process of base building leads to a breakout, we say with some certainty that a new bull market has begun. But, is it possible to define the point at which we can say that the bear market has come to an end ?
We will turn to the experts to seek an answer to this question.
William O’Neil, developer of the CANSLIM investing method says:
"All major bull markets started with a reversal and then a follow-through within the next four to ten trading days."
What is a follow through day ? The Follow Through day occurs when the Index records a gain of at least 3% with above average volume.
On Monday, October 27, the Nifty and the Sensex did have a reversal day. The Nifty fell to 2252, then recovered all its intra day losses to close at 2525. Now, the Index needs a follow through day within the next four to ten trading days. With two holidays this week, the fourth trading day falls on Monday, November 3, and the tenth trading day falls on November 11.
If we have a strong follow through day between Nov 4 and Nov 11 with above average volume, the reversal day will be confirmed, and, according to Mr O’Neil, a bull market may well have started.
My Notes: I have not done any research on such inflection points. The base building process is my signal, that will take its own time.