Tuesday, August 12, 2008

Bottomed Out

In my earlier posts while replying to anna’s (Bhavesh) comments, I mentioned about the Bottomed out markets. There is still discussion is going on, whether our markets are bottomed out or we are yet to see some blood. For the moment it seems that markets (specifically Sensex) have bottomed out @12500 levels. Now I am not discussing this point now!!!

But once in the bear market, if markets are bottomed out (even if it is temporary also), the range bound from that level will be sharp. The heavily beaten downed sectors will bounce back very sharply.

For example see the graph below.










From technical charts it seems that market is currently bottomed at 12500 levels when it touched that in July 1st or week or so. But after that, see the recovery from 12500 levels to 15500 levels. Almost 24% gain from the so called “bottom”. And see the Simple Moving Average of 10 & 20 day charts. 10 day MA crossed 20 MA in July 3rd week, which indicates the upward market movement. And almost market is above both the MAs indicating that at each and every other step it is having some kind of support. And most important indicator of the entire indicators, stochastic oscillator is also showing this trend. See how exactly from the bottom it is showing upward trend. And still it is in the range of 80s. That means profit booking may start for every upward rally.

Now if you a take data from bse500 companies out of 500 companies nearly 400 companies were beaten down very heavily. In other terms bottomed out. Summery of return of these 400 companies is as follows……


Number of Stocks

% of return after bottomed out(1 month returns)

69

50% & above

175

25% to 50%

117

10% to 25%

32

0 to 10%


Reasons for this pull back rally in bear market may be different for different people. But ultimate thing is returns what investors/traders are getting. Timing is very important thing in the market.

So

Keep reading……….

Keep investing…….

1 comment:

rs said...

Hey Naveen you know I am new to these stocks and shares its ok studying the financial definitions I get a bleek idea but the share market is acting very strangely its going up and down for the past few days and I have been observing the pendulum like swing is there any conclusion in sight so that new and aspiring investors like me would invest????