MarketsmithIndia Articles

Market Status Changed to Downtrend

February 01 2020
  • Nifty fell over 2.5% today, as the government put forward its budget for FY21 in the parliament. The Indian market has been moved to a Downtrend due to higher number of distribution days (six days) and rising fears about spread of coronavirus.
  • We changed the market status to an Uptrend Under Pressure on January 28 after Nifty breached its 50-DMA. Since then, it found resistance at its 50-DMA. Today, it broke down toward its 200-DMA.
  • We recommend that investors trim positions, raising cash if possible, or keep a defensive approach by holding stocks that are resilient in a falling market. Investors should consider booking profits in stocks that have performed well and have advanced 20-25% from their ideal buy points. Even if market undergoes a small correction, these stocks are likely to fall more. Further, stocks slipping below their respective 50- and 200-DMA on above average volume should be sold. Consider exiting stocks that have declined 8% from your buy price.
  • Looking forward, we will shift the market to a Rally Attempt if Nifty establishes a bottom and stays above its recent low for three straight sessions. From there, we would prefer to see a follow-through day before shifting the market back to a Confirmed Uptrend. Should this occur, the focus will be on ideas that show the best relative strength with good accumulation. The stocks that recover the quickest tend to lead the next run. Investors should maintain a watchlist of attractive growth stocks and wait for the market to show signs of a Rally Attempt.

What do you think? Please email us any questions or comments.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.

What do you think? Please email us any questions or comments.

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.For more information, see our Legal disclosures here.

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