In the last 4-6 weeks the only words i have been using is WAIT dont be in a hurry ... One basic thing about markets is in highly bullish sentiments stock may run beyond targets valuations etc.. Had stocks which moved 100-400 % and even more in the rally. Same time the excesses in the markets do get rationalized and optimists cleaned.
On the other hand in highly bearish sentiments stocks can go much below fair value levels or stay at attractive valuations for a long time before settling for an upmove. And currently we are on the other side where fear , panic and bearish sentiments are running high so ideally one should not hurry and let the dust settle , wounds be healed and then only would we see any reversal and this will take quite a lot of time and pain.
Investors who did use our caution in the start of Jan and subsequently to reduce on regular bounces and have quite a good amount of cash should continue to wait as panics create exciting picks for the patient investors. Those who have made the mistake of not being disciplined and have not trimmed portfolios can only look to generate fresh capital for better recovery . But yet again dont hurry with the capital allocation wait for stability.
Sensex Technical View :
Sensex has broken the triangle below 17200 zones and we can continue to slide lower in coming days and test the lows . 16450 the nearest low if broken can lead markets to 15800 or below . The triangle is huge in size and the recent low of 16450 is crucial for any relief . Till markets continue to sustain above 15800-15300 zone on a monthly basis the long term 5 yr bull trend continues to be strong. Closing below the zones will only make us review the long term 8-13 yr cycle which we are in .
Also as was suggested if marketss sustain below 17200-17500 zone generate more cash and now the right thing to do is wait with the cash.
Strategy should be to wait for stability to come near to 16500// 15800 or anywhere near to lows and only take a directional call for investments when the dust is settled for a while. Traders should continue to avoid. Every business has its great seasons and off seasons so learn improve in the off seasons to make more in future...
Sunday Thoughts :
Markets have always been about the greed and fear . Investors tend to get very greedy and optimistic and expectations go obscene. This is what happened when markets ran up till jan where in a gamut of stocks gave 100-400% move. Now in the current crash disciplined people who kept strict stoplosses , partial profit booking and capital preservation are getting impatient to get back but need to be patient. Many of the readers who have been with us for a long time are now relieved that the inculcation of discipline since so many months and years has kept them insulated of grief.
What next .... Markets have collapsed in matter of 2 weeks and the quite a lot of obscene notional profits cleaned in a matter of no time.
This is what is the basic rule of any rally in market or natural growth. Buildings built over 1 year can be broken in 2 days by a stack of dynamites . thats the only reason why builders do tend to take bookings sell some of the flats early even though he may get a better price on opening but in business u need to take some money home all the time so that u can use it again whenever its needed for further projects .
Currently a building has cracked and renovation or rebuilding of the same will take time and growth will be slow as we need a good foundation to be built first . Right now the cracks are widening and getting cleared of any dirt left. Markets will continue this process of cracking for a certain time period as we have seen a good price correction but still we havent seen a good time wise consolidation .
Wait out for some more time let the base be built , consolidation and stability be seen and till then be ready with ur cash or fresh capital and book good picks at decent levels maybe 10-20% higher from the all time lows but in a stable market. Many of the stocks which looked gr8 at say for example 40 rs 6 months back and then went up to 100-150 .... have now retraced back to the same price in no time but fundamentally the company has not shown any de growth . Same stocks u may even get it below the prices 6 mths back in case of weak sentiments so do ur homework find out good businesses and u can soon be part of the story .......but yes only if u follow good business rules and discipline ...