Dear Investor,
New story is back on the block. Ireland bail out and China interest rate raise are two hot stories used by market makers to move the market. The idea here is Ireland could go bankrupt and that would cause disruption in Euro Zone impacting world economies. China Interest Rate raise will dampen the demand for commodities and people will buy less houses and commodities will be cheaper. Whatever the story might be, it will be used to get the people move.
NIFTY chart below is still holding the support line going back to Sep 2009 low. A break below will this will have cascading effect as more people will panic and sell. Look at SBI trading if you do not understand what I mean. This selling will stimulate more people to sell out at whatever prices they can get. That will trigger more stop loss orders and the effect will continue until we have a washout day where people just throw out their stock at the market to sell and that day the market bottoms and then market trades in tight range for few days before moving forward.
Those of you think this correction is a surprise to them then I am surprised. I asked you a question two weeks ago. "Do you think this market will never correct?" and nobody answered. I think you all agreed that the correction will come. Being said that the market is not in downtrend yet. It has just taken support at the blue uptrend line. Only thing to worry about is that the money flow is extremely negative on this market. Simple terms, Smart money is moving out of stocks and going to sideline.
There is lot to talk about this chart. First look at the red volume lines. There is already a panic happening. I keep mentioning one fact, this market has tremendous purchasing power. so I am not sure if we will really have a correction back to 5600. That will be your sweet spot to grab some shares. Immediate support is at 5900. We should be able to hold.
I like sugar stocks. It does not mean you go out and buy them. It is just for you to focus on them. When I am convinced the uptrend is in, I will let you know. Remember one thing, anything you buy in this bull market, you must expect correction of 30% and not panic. Select the stock carefully based on technical chart and fundamentals. So your first position should be very small and add more if the investment works. There is difference between just grabbing some gains and investing in a trend. Those who are fighting for next day gain are the ones who will suffer the most. I do not know anybody who became rich day trading stocks. But that is what masses think and do. It will work sometime but they loose the most in such corrective events. Then they do not dare to buy when the shares are cheep. You need to have your plan to when to buy and when to sell. Building a portfolio is a years of process and not just a single day gain.
Check the sugar stocks charts. These guys have traded in a tight range for quite some time. Now they are trying to move up but Ireland and China has come in their way. So they have started to turn down. Grab some when they become really cheap in upcoming correction.
Think your plan to handle your emotion and portfolio if the correction continues. Its not the end of the world. In bull market these corrections happen and they sometime last longer than your patience. Not being able to hold uptrending stocks is the "Curse of Bull Market".
Thanks
Anil
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