If The Market Is Bearish Then Look For A Trend Change
Learn more about how to spot buying opportunities in a down trending market. A bearish market gets investors and traders worried and they get busier in offloading the shares in their portfolio. But a bearish market also gives trading opportunities.
A bearish market signals that the market is not performing well and that traders are selling off their stocks. Here you need to wait to see if the stock prices are coming close to a long-term demand zone. This is where you get to buy the trade.
A long-term demand zone can be spotted in the yearly or monthly chart. It could happen that the year or the monthly chart is still in an uptrend and this big fall in the stock prices was indeed a correction. You thus wait and watch to let the stock price enter the demand zone on a higher time frame chart.
How do you trade when the price reaches the demand zone?
After a fall in the prices in the market, you would not be confident to buy the stock right away. Thus wait for the stock prices to enter the demand zone of a monthly or yearly chart. Switch to a weekly chart and look at what the stock is doing. If the demand level was a strong one then-then the stock will start to show you a trend change from here. You can see this when the stock makes a higher high and higher low. When this happens you know that this is a signal for you to buy the stock.
Why should you buy at this level?
In a technical analysis term, this is a demand level. This is where you get the stocks at the cheapest price. So it makes senses that you buy the stocks at the wholesale price. After you enter the trade and if the trade moves in your favor then stick to the trade and ride with the trend.
Bearish markets thus give you one big advantage which is to buy the stock at a very low price. Thus when the market is bearish it is not just the time to panic and clear off the portfolio. It is also the time to add stocks to our portfolio. However, take care that you wait for the signal to turn to bullish before you buy the stock. Do not hurry because if the level is not a strong one then this could make you end up in a loss.