In the recent blog i mentioned what should a retail investor do when they see market crashing (https://askkuberupdates.wordpress.com/2016/01/08/what-a-retail-investor-should-do-when-market-crash/). There i mentioned one should collect some cash while market is crashing badly even it means booking some losses and sit tight for opportunity for bargain hunting. In the above post it was also mentioned that one should distinguish with market crash and small corrections to make sure one is not making a mistake of selling stocks on minor correction. From the nature of beast current market fall is not correction but a real crash and below mentioned criteria applies.
Previous blog raises the question how do a retail investor know if market has bottomed out and he can add some positions. To get answer of this question I looked at historical index price chart and found the same pattern in previous market crash. From previous price chart i will like to draw some conclusions. Before jumping to conclusions we can see similar (crash) trend happened on 2011 and lasted for one year. Figure 1 is the NIFTY chart for period Oct 2010 to October 2011. Figure 2 have the NIFTY price chart from Jan 2015 till date. If you see closely both chart have the same pattern. Also we can see in the end of 2011 crash market was volatile but it was range bound too. One can say similar pattern happened in Feb 2011 till Mid march, how do we know that was a false rally. This can be answered by the red line in 2010 chart. Around that period bottom line was not converging while in the later part we can see resistance and support line converging.
In brief i will advice to wait for range bound and volatile market for bargain hunting.