New Delhi: Technical analyst, Deepak Mohoni of Trendwatch refuses to describe the market crash as a bull market correction.
He says that stocks do not fall like this in the bull market, as there are always buyers, who will come up and snap them.
He thinks that there is lots of money still waiting to get out of the market and is hanging there just on hope.
Excerpts from CNBC-TV18's exclusive interview with Technical Analyst, Deepak Mohoni:
Q How do you trade now as a trader after the whack that the market has got? Do you go short or do you stay out and see the market stabilize for a while before taking a directional call? What would you do?
A One has to wait for the intraday volatility to come down because any position you take in either direction is likely to get stopped because each five-minute swing is massive enough.
So even if you are in a right direction of the trade, you could get stopped because the counter swing is coming up. Such kind of high volatility is not conducive to short-term trading.
One has to wait for that intraday volatility to come down a bit first.
Q: In technical parlance, would you call this a bear market or is it a savage correction in overall bull market?
A: This is no bull market correction. Stocks do not fall like this in the bull markets.
There are always buyers, who will come up and snap them. Over the year, it is looking like that there is lots of money still to get out of the market and is hanging on hope.
The smarter money is actually the one that has got out so far.
Q: What sort of band would you want to see this market move within?
A: I would like to see it settled down at any level because once you get that slightly narrower band of trading, then you will get the narrow band.
Right now there is absolutely no sign of it. So this is a market in disorder, it is not following any particular trend.
Of course, it is falling but it is not trading in a particularly well-defined fashion.
Q: You have made the point that it is difficult to look at individual stocks at this point but even in terms of relative strength when trade reopened, did you see anything?
A: Not really, because the volatility is much too high to be comfortable with any decision.
The probability of the rate going wrong is extremely high. So in this situation it is best now to trade it on short-term.
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Q: In the intermediate term what are you going to do, as a Nifty trader? Is the opinion split in the middle whether there is a shorting opportunity or a long call?
A: It is too late to go short, even if the decline continues.
If the market has not bottomed in the intermediate term, it may continue further next week.
Q: If certain stocks look attractive at current levels, technically is it worthwhile to look chart wise and look at chart tops or chart patterns in certain stocks, which look attractive?
A: I would advise to stay out of the market and lighten positions, if one has got. For, if this is the start of a bear market then things could get much worse.
In the bear market the fundamentals will keep improving till the bottom of the bear market. Obviously, now the fundamentals are much better than they were, when the Sensex was 25 per cent higher.
So it will get better even as the markets go down but that doesn’t mean that stocks will go up.
Q: What are you advising your clients at this point?
A: Investors would have a brilliant opportunity to invest in a bull market but in a few months from now and not at present.
If one had invested on the May 10 or 11; then one’s portfolio is already down 30 per cent, and to get back there again there must be a rise of 43 per cent.
I would ask to wait for this decline to get over. It is going to take a few months.
It is immaterial if the stock is attractive because it will be cheaper later.
As far as traders are concerned, I would say don’t trade even though it looks good on the short side because the volatility is too high.
They have to wait for the volatility to get reduced because then the stop loses would be effective.
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