Hiccups To Keep Markets Upward Movement Under Check In Short-Term
Turning a blind eye to the fears of the second wave of COVID-19, geopolitical tension as well as economic uncertainty, the bulls on Dalal Street crossed each barricade with ease and scaled to the level of 10,550, which is 61.8 per cent retracement of the fall of January-March. The market participants celebrated this euphoric run initially but the negative global cues and the reports of escalating tensions between India and China laid red carpet for the bears, which were in extinct mode on Dalal Street. The situation was similar to someone playing game of snake and ladder and getting hissed by snake at the level of 99.
Once again, Wednesday’s drastic fall made the headline that this is just a fear of missing out (FOMO) rally or a rally chased by liquidity. As William Shakespeare has quoted “What’s in a name that which we call a rose by any other name would smell as sweet.” In this context, what is in the name of a rally?! What is more relevant is that this rally has helped investors and traders to make some worthy returns in the short-term. Further, this rally, which we had witnessed from lower levels of March 2020, was seen on broad participation.
Recently, as many of us are aware, there is a rapid surge in the new demat accounts during the pandemic as well as a mass participation by the new traders and investors. We would like to inform that the new breed should not get carried away with the mammoth move, which we have seen in the stock price in the recent days because stock prices do not move in straight lines. There can be some really volatile moves that can throw everyone off balance.
Hence, if you have made some good money by trading or investing in smaller companies, which are grappled by some corporate or debt issue that of late have been bouncing around, like throwing the dice in craps table, so, in that case,you can give yourself a big round of applause. However, you have to be cautious of not getting complacent because we have seen in the past that in the urge of getting quick and easy money, we tend to invest in stocks, which are not good companies and when the bull music stops, it only needs one bad stock to ruin your portfolio. Hence, consider investing in the stock market as a journey and look out for real wealth creation and not day dream of getting rich overnight!
Let us now understand that why stock selection and being in the right stock at the right time is important. We would like to give you an example of Wall Street. On Wall Street, there are three major indices-Dow, S&P 500 and Nasdaq. There has been a divergence of performance reported this year and if we go by the words of Wall Street Journal (WSJ), the divergence in performance this year is the widest in more than a decade. The tech-heavy Nasdaq Composite, which recently registered its all-time high, gained 10.43 per cent in 2020 while, Dow Jones Industrial Average of blue-chip stocks was down by 10.83 per cent and S&P 500 was down by 5.58 per cent. This clearly tells us that if an investor stayed in the top stocks of Nasdaq, they would have fetched healthy returns as compared to other stocks even during this challenging time of COVID-19 pandemic.
Similarly, in Flash News stocks recommendation, we do take into consideration an important factor, which is Relative Strength comparison study. It has always helped us to generate good and consistent returns for our readers.
In the near term, the movement of the markets would be dictated by macro-economic data, geopolitical tensions between India and China, virus infection cases worldwide, especially in United States, where Texas, Florida and California have reported more than 5,000 new cases each, monsoon spread, currency movement and fluctuating crude oil prices.
Technically, the charts are indicating that short-term trades should take profit off the tables and sit on the sidelines before we get a clear signal of resurgence of the bulls. On the downside, 100-DMA (10,020) is likely to act as a good support level.
