Last week the Nifty finally closed on a weekly basis above 5400 first time in 6 months confirming the long-term uptrend. But more importantly, last week, we eliminated the possibility of a sideways trend after the end of the 14-month long-term downtrend signalled on 27th Jan, 2012. For those who have been following our Facebook Posts, closing above 5400 on a weekly basis eliminates any possibility of a sideways trend and maintains the long-term uptrend that we have had for a few weeks now.
For those who are not following our Facebook analysis, here are the events that have unfolded since the beginning of this year:
- The long-term downtrend (from Nov 2010) on weekly chart broke on 27th Jan 2012 when Nifty closed above 5200 indicating end of the bear market and possibility of a new long-term sideways or uptrend.
- Nifty continued to gain on a weekly chart in subsequent weeks breaking the resistance levels of 5365 and 5400, that too on increasing volume, again signs of ‘institutional money’ like FIIs flowing into the market.
- Nifty finally closed on 17th Feb, 2012 way above 5400 on a weekly chart, eliminating any possibility of a sideways market after the break of the long-term downtrend line on 27th Jan, 2012.
We also strongly feel that we are now at the start of a new bull market. Why is this so?
- We see rising volume during this uptrend which is a sign of FII money flowing in.
- Plenty of stocks are going up on strong volume. This is typically a sign of a new bull market.
- The overseas markets are also doing well, closing at new highs.
Yes, there will be corrections, but they will be more of a short-term nature like in any bull-market. We can almost hear the naysayers giving reasons why this might not be a start of a new bull market:
- Greece crisis is still not over and Europe is still in trouble.
- Government is passive and has not done anything to stimulate the growth in economy.
- Indian Economy is still not in good shape and the valuations of stocks do not justify the ‘run up’ in the market.
- Budget is around the corner and market is just being driven up artificially just to be brought down later.
But, you see all these naysayers ignore one important aspect, and we’ll write it in CAPITAL letters so that you remember:
- TECHNICALS ALWAYS LEAD FUNDAMENTALS (Attendees of our “Basics of Technical Anaysis” webinars know this)
Most bull markets start when everybody least expects them to. This is mainly because the newspapers, TV and other media are loaded with bearish and doomsday stories, especially because fundamentals are not that strong at the start of new bull markets, and the situation is no different now.
So, what is the best way to trade in this market? Since we now have an uptrend in both short-term and long-term, our strategies have to shift to trending strategies which work best in trending markets. One of the best strategies that works in this kind of a market is the “Volume Breakout Strategy” that we have talked before in this blog.
We’re sure you don’t want to be one of the majority of investors who are part of the ‘herd’ who lose money by getting in at the tail end of the market rather than at the beginning of bull markets like these! The good thing about the “Volume Breakout Strategy” is that you will always find new stocks to invest in, as, at the start of new bull markets, stocks are breaking out of resistance on strong volume everyday. If you are an Investar user, the screener is a great tool to find out such ideas. And if you want to get in-depth training on this, make sure you attend one of our “Basics of Technical Anaysis” webinars, as we cover this strategy in depth over there.
Look out for more blog posts in the future for more ideas on this! And make sure you are following our Facebook page to keep informed about the market and more strategies!