Sensex continues to remain on the lower sides and is still no sign of a bounce till it forms a base around 15800-16100 zone which is next support area. As the triangle broke down and was suggested generate much more cash if we go below 17200-17500 zone . Lower side sensex has strong support around 15800 sustaining below can only be due to some untoward news . The daily volatility and dependence on global cues is a sign of an undirectional market waiting for some triggers. Such a scenario needs a lot of time for markets to stabilize and find bottoms or consolidations.
All the readers , friends and others who did took the caution regularly and generated quite a lot of cash have been asking us to give out a list of stocks to accumulate or buy for medium to long term . Currently cash is king as markets can tend to remain directionless for some time and investors , traders will get time to buy and we cannot get into a runaway rally from such a fall so dont hurry.
Being a technical analyst i would prefer buying a fundamentally good stock only when it has caught momentum or may soon get into a move and thats how we kept picking stocks much much early . As people must have seen in the previous rally many of the discussed stocks went beyond targets and valuations kept on stretching and all we advised was to trail and book partial profits to be insulated from cracks. Many of the stocks we discussed before like went up 100-400% where in we were only looking for normal returns of 20-30-40% and always the advise was to trail and book partially and never ever be on margin or leverage. So the bottom line is in good sentiments stocks can go beyond targets , valuations . So we insist on discipline of stoplosses, trailing and booking partially on rises although due to this we may not be able to take full benefit of 100 or 400 % gains but that kept all of us insulated from a crack.
Now on the other side all of us may have generated a lot of cash from the portfolio by reducing on cautions , and also fresh capital at current stage . The thing to note now is we are in weak sentiments and being a technical analyst i would suggest heavy buying only when markets have given a good reversal signal. And as on the upside valuations get stretched on the lower side in weak sentiments many stocks can go much below fair value and may stay there for quite some time. The approach now could be buying very very small qty in good funda stocks and to see it technically we should actually wait for a reversal signal or and end of consolidation to start buying which is still not seen . In this strategy we may not be able to buy at the lows but might get in 10-20% higher from lows but the discipline and patience can help us to create more wealth in a less riskier manner.
So in short wait with the cash and fresh capital maybe we may see a reversal or consolidation in coming weeks. After a major drop markets can take a minimum of 4-8 weeks and on maximum side 12-20 weeks in a long term bull market to consolidate. If we consider Jan to be the low we r still only 5-6 weeks so we will get whole lot of time ideally and markets will not get into a runaway rally so there is no reason to hurry with the cash.
Best Regards,
Nooresh
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