Nov 27, 2010

About Market Correction and more

About correction and more-

We were enticed to write this article, by the feeling of amazement the investors were experiencing when they see several stocks making yearly and new lows without making any noise!
They were amazed to see their many of the hi-performer stocks that were analyst favorites and giving them a kick n ride while the hay period of the markets and when it was anything but green on the stock screens.
Correction is a word that is known by all in the market.
You will see any ‘averagely intelligent’ investor saying ‘he will buy in correction’ and that ‘he is waiting’.
But that never happens. Either he jumps at the last movement out of impatience or steers clear by fear of further correction and aversion and pain of notional loss.
Basically, most investors want their stock only to go up from their buy price. Otherwise they will not invest! Or the market is not perfect then!
Why this does happens?
The fact is that they are ignorant and un-knowledgeable. This might sound harsh. But we are not here to please anybody!
Investors simply do not understand when to stay in, when to wait for correction and when to jump in. We will also emphasize the importance of ‘what’ in all these along with ‘how’. Because ‘what’ is what the bottom-line come in the market.
Some of them may know that correction is an opportunity (it is an all-together different subject how to tell a transient correction and a beginning of bear phase. I said ‘beginning’, because as such the bear phase in its form is a boon to investors for a 3 year horizon. We will discuss about it in other article.
So, I believe there are there always a bear phase and correction going on in market! How?
Let’s understand it this way, there are 3 types of correction or bear phases. Any one or more of them is always going on.
  1. For the whole market, which most of us are aware such corrections
The following two might sound unfamiliar to you,
  1. Correction for a particular sector, and
  2. Correction in a particular stock