- Bull market: Economy sentiment good (Optimistic), market volume increase as market moving up
- Consolidation market: Market consolidating and waiting economy news to drive it to Bull/Bear market trend, it is also called Profit taking/Filtration process
- Bear market: Economy sentiment bad (Pessimistic), market volume decrease as market moving down
Bull market:
During Bull market, everything seems to be so positive until we are trying to neglect the negative news. The easiest way to confirm it is in the Bull market is by just simply dropby to visit anyone of the broker house to check the crowd, normally it would be fulled of retailers inside the broker house until you can't even find an empty seat there. Remember the cheerier the crowd & the higher the capacity of the crowd showing the "Danger" is just around the corner! It is simply because most of the retailers like to see the stocks moving higher and "Chase" to grab it, they are purely looking at the stock price moving up without analyse the fundamental of the stocks. This process may eventually push the stocks overvalue, subsequently the profit taking & selldown will happen when they realise the fact that they have bought at the high side which it is not worth at all.
The other way is to do some home work studying the fundamental & technical data. You may easily retrieve most of the details of a stock by checking through the company profile & company financial statements. In order to ensure you understand a company well, you must always updated with the news announced by the company. For ex: The cash flow, balance sheet & the profit & loss statements shown in the financial reports are very important as it is showing you the "wealth & health" condition plus the business potential of the company. It means you better be clear about what makes you invest in the company! Besides, the other few important data which you must understand are PE ratio, Earning per share, Dividend per share, etc... In an ideal Bull market, you will definitely detected most of the fundamental & technical data are so bullish & in growing stage. Most of them should be in positive growth region.
The last method is to identify the market is in Bull trend is by looking at the technical chart. The most common pattern of Bull market is there will be "Higher Low" means the trend is started with moving up 10 steps, follow by profit taking which happen in consolidation stage with a little downward pressure - may drop 3-5 steps, then bargain hunting happen again to push to price move up again and break through the previous high - may move up another 10 steps again. This process created few "Higher Low" until reaching the "Top" that the stock is tired & no energy to move up anymore. This is where the top volumn comes in as well! Again, it is the "Demand & Supply" philosophy! The stock price and market volumn should move in the same direction to moving up in the Bull market.
Consolidation market:
In a Consolidation market, the prices are moving sideways when the buyers are fighting with the sellers, or the Bull is fighting with the Bear! This condition normally happen when the market is resting after moving up or down for a certain period, or building the top or bottom of the market. Futher to the consolidation market, the price will breakthrough and move into either up or down direction. This is when most investors are staying sideways and waiting for fresh market news to drive the direction. Any breakup from consolidation market is a buy call, and vice versa when a breakdown happen.
Bear market:
The Bear market can be easily recognised when everything is seems to be so negative, it is the total reverse to Bull market sentiment. For instance, most of the financial data such as GDP is negative growth, unemployment rate increase, consumer spending decrease, etc... I will not spend much time into this as if you understand the Bull market, it is very natural you would know the Bear market the best!
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