Dear Investor,
Greece is sending panic waves into financial markets. Well, it is a tool market makers used to curb enthusiastic investors. If you have read my previous post in March, I named is "Why does it look like 2008 again?" . I obviously slowed down my postings because it would not have made any sense.
Even though market was moving higher, most of the stock just stopped moving ahead and there was a serious loss of momentum. My Mar 20 post mentioned that market will move higher through its previous high and shorts will have to cover their positions. That will move market even higher. exactly same scenario played out. People without game plan got caught in the make money quickly and are now selling.
Observe the above chart. Red line is 150 day moving average line. Black line is actually NIFTY index. Best buying opportunity is when market pulls back to red line. We are just there now. What technically it means is that we are at a buy point. I do not want to go all out and start buying just because the fall is so quick. So we need to give it time to base out a bit. Base is when the market does not go up or down a lot and just stabilizes. It needs to spend at least 1-2 weeks just doing that. That is time you know that the big guys have started providing support and you could participate too.
Market will not just shoot higher from here. It just does not happen like that. We being human mind tend to predict future. Those who try to predict get caught on wrong side. Investing is very simple thing to do. The most important thing to learn is what not to do. One of the NOT DO is to predict what will happen next. I learned is after burning a lot. But somehow we consider ourselves to be fortune tellers and predict oh...Reliance will go up now...oh SBI will go down now. There is no need to do all that. Because you don't move the market. You need to move with the market.
Market in India has been flat for past one year. It goes up and down in a range. So we are approaching the lower side of the trade. So what do we do now. To Buy or Not to Buy?
Well, if you have learned how these things work, you know by now that you should not buy stock which is below its 150 day line. Refer to my previous blog about 150 day line stock health checkup.
In order to invest, you need a base where the stock moves in a small range for few days to few weeks and then it closes about its base for at least one week. That is where your money should flow.
Another most important action I would like you to prevent is Being early to the party. Some people predict when stocks start falling and just imagine the it will move up from next few days. It does not happen like that. A falling stock will fall and it will only start going up after it builds a a base. Look at bharti airtel, it has been building base for quite some time. but I will wait for its close above its base.
I have mentioned many times before about not trading all the time. There are very few who actually made money trading everyday. Trade with a plan. Have your game plan to flow with the market.
With past two year experience , I have concluded that you must flow with the market and not fight it. So right now the market is correcting so your mind set should be that market is going correct. There will be a point when it will stop correction but it is certainly not today.
Build you list of stock which you will buy when market stops correcting. Watch the charts and look for base. Do not be early to the party, you will be burned and your hard earned will be taken away from you. Wait for market is trade in small range for 1 - 2 weeks. Market is here and it will here for long time. Take your time before investing.
Following is a very good example of base and breakout. Gruh Finance should be on your list of investment since it is holding so strong in correcting market. That means somebody is convinced about its future growth and is adding it to his portfolio.
Look at Shriram Transport. Its not even moving a single rupee in this volatile environment. That means something is cooking and when market rallies, this baby is going to fly high.
But question remains to buy or not to buy today. I will say, hold for now. let the market spend sometime correcting and basing out and move on first sign that correction period is done.
Thanks
Anil
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