Chetan & Vivek

Is Market Near Correction: Chetan Panchamia’s Data-Driven Insights Offers a Good Clue

“When the market is going to crash?”

“When will the stock market crash again? How can we determine when the next sell-off of 25% or more is coming?”

“When is the next market crash expected?”

“Is the market going to crash in 2020?”

Everybody is interested in the crash now. People are asking on Quora, Facebook, Twitter and everywhere.

That’s probably the most sought-after question right now on social media.

The truth, however, is nobody knows the clear answer. And as we have written some time ago in the blog: Is Market Headed For a Deep Correction?

We clearly told some time ago that the market is not going to fall anytime soon, and even if it happens; you will not get time to think and react as it happens.

The simple logic will be why market veterans, operators and institutions will tell in advance about their potential moves. They can earn only when retails are caught off guard at higher levels. And by the time, you’ll think something, you are trapped.

However, as we are alerting constantly to tread cautiously constantly and even booking profits at these levels and sit with cash.

The broader question and the most importantly, it is important to think is how to prepare for a crash and how the market tends to react post-crash.

Chetan Panchamia, a well-known technical analyst and trader, has tried to answer these questions lucidly using his amazing data-driven insights and experience.  When a trader of his calibre speaks something, you have to sit and listen. And that’s what I did.

And when the interviewer is Vivek Bajaj, India’s most well-known face in the stock market, you can be sure of something powerful, something solid will come for sure.

With Vivek in his typical smile and specs and Chetan in a deep baritone like a mountain stream, comes together, the combo packs a powerful punch.  When I saw the video, I was mesmerized literally. It was probably the best I watched or read about the market crash recently.

So, let’s start now.

The Basic Logic

Chetan quotes a famous saying of W.D. Gann: when you correlate ‘Bhav’ with ‘Samay’, you can predict many things in advance. And he has used these two aspects to predict how long will this bull phase run and how much it will correct.

Also, to make a prediction, it is crucial to know what happened in the past in similar circumstances and what happened after that.

Combining Time and Price gives you a powerful insight of possibilities not so obvious.

For his analysis, Chetan has used a weekly Nifty chart. To get an idea of when will happen the major correction.

 It is important to understand What is a Market Correction

Can you call 2%, 5%, 10% as a correction.  He considers that to call a ‘correction’ a genuine correction, the price should at least correct below 20% from the valid peak.

Therefore, if the market is at 18000, 20% fall means, it may correct at least 3600.

The second condition is it should touch the 50 Days Moving Average.

If these two conditions are met, only then it’s a genuine correction.

The data taken is from 2004 when the UPA government came into power and the Vajpayee government had fallen. The market has touched the bottom of 1300 from the high of 2100. Since it meets both the conditions, it was a valid top.  What was interesting was that after this, the rally lasted for the next 12-24 months. handing a return of at least 40% previous top.

Nifty weekly chart

The rally that started after this lasted for 2006 May and touched the high of 3700. Then, the correction happened of 29% and reached the bottom of 2600 between 15-20 June.

Again, the rally started and continued till 6370 in January 2008, giving a 72% return. Now, again the correction started severely and a huge correction of more than 63%. This rally started from this crash lasted for many years, but could not break the 2008 top.

It was finally broken in 2014, and once it broke, it rallied up to 9400 very quickly handing a huge return of almost 46% quickly within a year.  And it crashed from the level of 6800-6900, and after the bottom of this crash, the rally started up till 12600 which was formed in Feb 2020.

Though before that it has 3 corrections 2018-2019, they did not fulfil the minimum 20% correction parameter.  This parameter got fulfilled only in the 2020 correction. That’s the reason, 12600 becomes a valid top.

When This Bull Run End 

Here comes the twist now. If you take at least a 40% return from the 12,600 level, it’s something around 17,000+ levels, the return may be higher or lower. If it gives 45%= 18270 and at 50% return = 18900. It is not possible to predict, what will be valid top now.

However, it’s certain that Nifty is moving closer to this and that’s why you need to be cautious. However, if it corrects from the next valid top (17800/ 18200/18900/ 19000+), the correction may be at least 20%.

Though Chetan did not sound alarmist, it’s certain that the market is nearing the top or may have topped out already, who knows. Only time will tell. It is your time to pull up your shocks.

What Should Be Your Investment Strategy Now

Since predicting tops with certainty is almost impossible, it is certain that the margin of safety is less at 18200 and 18900 compared t0 17000.

Therefore, the best course of action will be to rejig your portfolio towards large caps in the pockets which have not run for long and offers a margin of safety.

We have a written a blog, you can take help: Market Next Week: Nifty & Bank Nifty View and Sectors to Watch

Think of booking some profit and invest in Gold or liquid bees or cash. ‘

Whenever the market falls, buy your preferred stocks in some amount as you don’t know whether the current correction will continue or may come later.

Watch this video as there are some other useful insights are also there: Here is the link of the YouTube video: When Will This Bull Run Last

Vikash Kumar

An investor with more than 15 years of experience in the market. I m deeply interested in positional and momentum-based trading strategies and love learning strategies and backtesting.

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