In this present correction, IT stocks such as NIIT Tech, Mindtree etc. & the Consumption space such as Jubilant Foods etc. have outperformed the market.
I have heard that stocks such as these that outperform the markets during corrections/bear markets often lead the next rally. Is this statement true in your opinion?
If yes, what would you say is generally the right time to enter such stocks? In other words, would it be prudent to enter while the general market is still correcting?
Or does a further correction in the general markets usually provide a better entry point for the potential leaders? i.e. No matter how much a stock is outperforming, further correction in the general markets will invariably drag it down as well.
Would appreciate the members’ thoughts on this topic.
Your assumption is logical. But it may not be always true. IT stocks and Consumer space outperforming may be (just may be) due to perceived weakness of rupee in near future.
If the rupee continues perform better than other EM or oil prices start falling (a rupee positive). Fund houses may change their views on IT and consumer space.
Better way could be to wait for bear market (not there yet) to get over and then take a medium term view on industry
On a related note, what would be a reasonable gauge to determine if the correction/bear phase has nearly ended?
From what I’ve read, one indication would be when the major indices consolidate for a while, followed by a few strong up sessions, viz. follow through.
Would you’ll concur?
PS - Of course, all of my queries and assumptions are theoretical in nature & market behavior is often very different. But just wanted a view on what the classic textbook theory would say.
Tougher to pick bear market bottoms because of cognitive biases. Once market is in down trend, we expect it to keep going down same as most of the traders expected Nifty to go to 12k when the market breached 11k.
Most trusted technical about finding bottom is market holding the re test of bottom and market approaching re-test at lower volumes on weekly charts. Just check the bottoms of 2009, 2012 and 2016 (twice). So there will be a formation such as double bottom, H&S or triple bottom and decreasing volumes each time market retests bottom. Again cognitive biases will always tell us that the re test is failing as we assume a mental picture of markets going down further.
I love this re test technicals because George Soros said this in one of his interview at WEF.
I would like to post about end of bear market. End of bear phase or start of a new bull phase can be determined by 2 ways , one by technical analysis another by general market conditions & by views of other market participants .
To find nearer market bottoms technical analysis helps & also TA is a logical way ,one can avoid noises & one can confirm or evaluate his views on market phase. Like sharp decline of stock market with high volume and retesting of that level again ( chart formations like double bottom or " W " , format , reverse H & S) , possibly at least one lower circuit limit on indice’s in a year . like year 2008.
And in case of general market conditions , Media start talking about bear market ,( normally media start talking about bear market after 6 months in to the bear market ) General news papers & news channels start talking about bear market & Fund managers , Brokerage company’s start giving lower level or target for the market , General economic conditions like the one happened in the year 2008 - 2009 , In case of end of Bull phase , normally comes with ,highly , highly oversubscribed IPO’s , all kinds of penny stock s reaches to their higher levels , General news papers start flashing Sensex or Nifty levels on front pages , Fund managers start giving target for higher & higher levels for the indice’s
Sorry, I don’t know about the subject of charting services. I only mentioned TradingView because that is one which is popular. In fact, I actually meant to refer to In.Investing.com for the Volume Bars on the Nifty.
PS- If you are interested in Candlestick Patterns, the Nifty website flags them for free. There is a section there which they call TAME or Technical Analysis Made Easy.
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