As we had mentioned many times before at 20-21k zones to generate cash and be cautious rather then optimistic at higher levels. Also we had come out with many posts alerting about reviewing the portfolio and discipline etc to safeguard our readers from being optimistic. Many people did took good cues frm the same and have been re entering slowly.
In all the previous corrections which have been highly violent and panic selling has seen the support on the lifeline which is a 5 yr trendline.
All the previous corrections right from the day of BLACK monday 17 th many 2004 , 8800 , 12300 and 13800 have usually respected this level on weekly or monthly closing basis.....
The above study has been the basis of our view of Sensex given from 8k levels for a long 8-13 year rally . The above long term channel has been a good way to find reversals in rallies and corrections.
All the earlier bottoms made near to the lower side of the channel have been respected for next 3mths-1 yr. Technically one can expect a strong bottom base to be formed near to the crucial level of 16500 ( there could be intra day lows ) on closing basis.
Strategy : The strategy at such levels should be to buy in staggered way and use the dips and panics to accumulate good quality stocks with a view of minimum 3 months to 1 year. Selling in panics near to these levels would not be the best thing to do.
Alternative view :
The long term bull trend which started from 7-8k levels will get into danger if the markets closed below 16500 levels for more then 3-4 weeks on a closing basis. Fundamentally the growth story of India remains intact for next few years. A breakdown below these important levels on a weekly or monthly basis should imply there are some changes fundamentally which we cannot understand.
So all in all if you believe in the growth story of India and particular companies can look to accumulate them with a long term view at these levels and review the same after 3 months again.