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TOPIC: This Is How You Spot A Stock Market Bottom

This Is How You Spot A Stock Market Bottom 3 weeks 1 day ago #11260

  • inthemoneystocks
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From recent all-time highs to the lows, the stock market fell over 25% in three weeks. This is the quickest drop in history. Thursday, March 12th saw the biggest decline (over 2000 points on the Dow) since the crash of 1987. Investors are panicking and running for cover, but many are also wondering if the stock market has bottomed. There are key factors every investor needs to look for. If done correctly, the profits can be insane.

1. Investors and stock traders need to monitor fear. The higher the VIX goes, the more likely the market is nearing a bottom. In 2008, the VIX traded between 70-95. On Thursday, when the stock market had its biggest drop since the crash of ’87, the VIX went over 75.
2.Control your own emotions and recognize the more fearful you feel, the more likely is the time to buy. Fear was palpable over the last few trading days. In fact, it was full out panic. Talking heads on TV were panicking, people were mobbing the the stores for hand sanitizer and food/toilet paper.
3.Look at technical levels. This is insanely important. Find a major pivot on the chart, look for a bottoming tail and isolate a huge volume day. When three things like this happen on the same day and the markets are down 25% in three weeks, you likely have at least a near-term bottom
4.Start small. Markets in full panic can pierce key technical levels. The smartest investors know they won't nail the bottom to the penny so they start buying small. They know they want to accumulate a total of XX position. But they start with buying 1/3 of that or 1/2 of that. This keeps stress down and often will give the investor an overall better average.
5.Go with quality names, not non profitable small caps. Stocks like American Express and Disney are down 30%+ in just weeks, these are quality stocks that should be considered versus high risk small caps that make no money. Same thing applies with Apple, Microsoft, Alphabet…ect.

The bottom line is, while $137 billion was pulled out of the stock market last week by small investors, the right signal may have been to buy the markets. Think about it like this. Three weeks ago the stock market was at all-time highs. Investors were praying for a 3% pullback to buy. Now they have a 25% pull back and are afraid to buy. Smart money looks for quality stocks and inches into them at key technical levels. That is how a fortune is built.
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