Dear Investor,
Bottoms are formed when people sell their holdings at any price and similarly tops are formed when everybody is willing to buy at any price.
Panic selling is very important concept. I learned it over past year. Corrections usually end with panic selling. Panic Selling is a selling in which no logic will work. Only sell orders will pile up on exchanges and buyers will buy at very bargain prices.
We saw last few months of topping action, wherein market did not move anywhere. Kept going up and down in a tight range. People got excited and could not control emotions. Finally they bought up at high prices. Market makers love this game. Now most of the available capital has been sucked into the market and no buyer is willing to bring in new capital. That’s were a story like Greece comes handy. Greece and Euro zone problems are just sideline stories used to prepare traders psyche. Once they are in that mode and they behave like zombies. The same person who was willing to pay any price is now just waiting to get out at a price he bought the shares. It does not come and sudden sharp selling with good market story helps get him out at lower prices.
This process continues until a last standing short term trader is out and a bottom is formed. So guessing for bottoms is a very skillful task. You will get burned if you enter soon and you will miss out big if you are late. It’s a delicate balance to strike. I rather be little late than just getting in early and burning my cash.
Question is when will we say its bottom? I don’t know. Most possible signs will be market trades above 150 Moving Average line on 30 Minutes Charts. Before this happens there will be heavy selling without any thinking and analysis. Frantic selling will continue with no buyers to buy. Then market will bounce for couple of days and same frantic selling will repeat with no buyers to buy. This will happen for couple of days. After these events are over we will see market not to go down anymore. It will successfully float above 150 day line on 30 minutes chart. That’s where the bottom will be found and next leg up should begin.
The important question you should be worried is not when the market will bottom? It might bottom for weeks. What you need to think about is which top 10 stocks would you buy when the market correction ends? I am watching list of 200 stocks which are holding very well in this correction. Obviously all the stocks are trading down for quite sometime. What you need to look for is the stock which did not fall a lot. That will show where the true strength is. This is the time to build your watch list of stocks that will be your primary target once this bottoming process is over.
I am watching stock where there relative strength is good and those holding well in this correction. Most of them are in base building process. Challenge is, even if the base is being built, I don’t know when they would start gaining momentum. Without momentum your money will be just idling in that investment. I am sorry that I am not suggesting any trades for quite some time. I know that you need the stock pick and not all my lecture. I just don’t feel its right time for new investment. I am watching few stocks which I will post when the time is right.
Thanks
Anil
Got a Question/Send your contributions for other members:
email:indiastocktrend@gmail.com
Please forward this email to your friends and family members to help them build wealth under technical stock market guidance.Disclaimer: Please trade with your own judgment or with the help of investment advisor. We are not responsible for any financial losses.Stop Loss: Sell Stock if it closes below this price. It tells you that market has proved you wrong. Accept it.
No comments:
Post a Comment