Tuesday, December 27, 2011

Are cash stocks bottoming out?

Any number of small cap and mid cap stocks have seen catastrophic losses. A question crops up: have these stocks seen their worst? VIP Inds has fallen from a high of 205 to a low of 73.5 in 4 months. GMR infra has fallen from a high of 94.75 to a low of 17.4 in 30 months. Titan has fallen from a high of 238 to a low of 154 in 4 months. Suzlon has fallen from a high of 145 to a low of 17.45 in 30 months. Similar stories can be repeated for many other mid cap / small cap stocks.

The question comes up: have these stocks seen their worst? Are they ready for a rebound now?

My Notes:
The bottoming out process in share prices is fairly easy to determine. Prices stop falling. A small rally comes about. The test of a bottom comes when a new decline starts which does not make new lows. This is the first sign that prices may have bottomed out. Smart traders can begin accumulation even before the last high is crossed.

We have started seeing small rallies in many beaten down stocks. These rallies will be followed by declines which should not make new lows. That will be the first sign of bottoming out.

Some fundamental inputs are required to ensure that we do not land up buying poor quality stocks. Many of the current fallen angels will never go up. Thus, I always stay with the blue chips. This is a decision that each investor must take on his/her own judgement.







1 comment:

Akash said...

MY QUERY ON MARKET , NEW YEAR MARKET CAN BOTTEM OUT ? JAN OR FEB ? START INVESTMENT IN JAN OR FEB , SHOOD INVESTER WAIT ? JAN OR FEB NIFTT CAN COME LEVLE OF 4000,?? GIVE ME SOME ANSWER