MARKETS BOTTOM?

RSI CHART

Fridays big fall took everybody by surprise! But on closer analysis perhaps it was not so out of the ordinary. I rem the 2005 October series, wherein the series fell tremendously and at the start of the next series the first day the markets tanked again... everybody who had positions to go long sold in panic on that one day... and after the first day the series went up like anything. I am not saying that this series will shoot up from the lows but I thought I would mention this point, as one should not panic...Now where do we stand right now. The short term RSI for the Nifty is nearing its bottom, now that basically means that there should not be too much downside immediately and there can be technical bounceback from these levels or perhaps 50-100 points lower... The potential upside in case of a swing can be to the tune of 100-200 points... But I was seeing the call buying rates, they still are holding a good premium. Still we are not in a situation wherein one can make a fortune by buying naked calls, with little or no premium (i.e. if the markets go up). The strategy in such a market should not be to outsmart the market. I would say if one is playing technicals then one can hope for a bounceback soon, but then its for players who are in the market. For people outside the market, it still is a falling knife... but then some stocks are nearing their all time lows, the levels that they have not seen in the past 2-3 years!!! In my opinion selective deployment of cash can begin, in stocks wherein the value is truly emerging. And as far as trading the NIFTY is concerned it is in a downtrend still, and hopefully in the short term 1-5 days we should see a tehcnical bounceback for sure.

(image courtesy indiabulls.com)