Today I will discuss how to identify the potential market condition, whether its a bull or bear market now? In the longer term charts investors are always eager to know are we ready to buy into the right market? Investors definitely will not want to buy into a bear market as price will continue to move to the down side and they will start having losses.
So traders typically want to buy into a bull market as price is likely to move towards the upside giving nice returns on the investment. To identify whether its a bull or bear market now we can look to the benchmark index like Nifty to get an idea on how the markets might be.
To identify a bull or bear market now we will use just 2 simple moving averages on price. Lets open a weekly chart of Nifty. We will use a 34-week simple moving average and a 89-week simple moving average on Nifty weekly chart.
Why these 2 moving average I am using. 34 and 89 both are fibonacci numbers and I have tested on a series of world indices this combination works great. The 34-week simple moving average is almost identical to the 200-day simple moving average which the institutions use. Many times I have seen price bouncing up or down from the 34-week simple moving average.
How To Calculate The Bull Or Bear Market Now?
I use the close above 89-week simple moving average as a bull market and a close below 89-week simple moving average as a bear market. If the 34-week SMA is above 89-week SMA I consider the market as super bull and if the 34-week SMA is below 89-week SMA I consider the market as super bear. When the price candle is touching the 89-week SMA I consider that market as undecisive. Seeing the charts we can easily say that we are into a super bull market and we need to utilize dips to buy the market.
Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.
Categories: Trading Strategy