This 5-minute read can save you from any ‘Minor’ or ‘Major’ Stock Market Crash.
Case 1: October 18, 2007: The S&P BSE Sensex down by 1,428 points from the day’s high. But, Mr. Kevin had the trust that it was happening due to weak global cues. His projection was right and Sensex finally recovered from day’s low and ended with a loss of 717 points (3.8%) at 17,998.
Case 2: Jan 21, 2008: The S&P BSE Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. But Mr. Kevin retained on his baseless projections that it was merely a Global selloff and market would be recovered.
(Next day) Jan 22, 2008: The S&P BSE Sensex fell again and saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. And it was the time of ‘World Economic Crisis’.
Now he was ‘Confused’ and ‘Trapped’, Confused because his prediction went wrong and why not, He was making baseless projections and Trapped because his investments got stuck for long term. So, he decided, not touch his money until the market recovers.
Kevin was looking for a strategy which can give him a ‘Sure Shot Trigger’ before any major or minor Market Crash happens. Big Market Crash doesn’t mean that when the Market plunges and recovers next day, Major Market Crash like Lehman Collapse, Brexit, Demonetization etc which takes time to recover.
His Friend Stuart had a decade of experience in the Market and he advised Kevin to use Exponential Moving Average (EMA) to identify the trend of the Market.
The Strategy was: Use 100 EMA and 25 EMA on the weekly chart.
- Enter when 25 EMA crosses above 100 EMA and
- Exit when 25 EMA crosses below the 100 EMA.
The Strategy was pretty straight forwards and beneficial. Kevin amazed to see that this strategy already warned investors to exit when S&P BSE Sensex hits 15000 levels, and went down to 9000 levels.
When he closely observed the graph he saw that Sensex plunged from 21,000 levels to 15,000 and then down to 9,000 levels. So, he asked Stuart to develop this strategy so that we can get the trigger near 21,000–20,000 levels. If this is possible then it would be a Revolutionary Strategy.
His other friend Bob was more experienced than Stuart and he worked hard and converted his wish into reality. He developed a strategy which can even give exit triggers near 21,000 levels.
The Strategy was: Use Commodity channel index along with 100 EMA and 25 EMA on weekly chart.
- Enter when CCI crosses above 0 levels and get the confirmation signal when 25 EMA crosses above 100 EMA and
- Exit when CCI crosses below 0 levels and get the confirmation signal when 25 EMA crosses below the 100 EMA.
Kevin saw this unbelievable combination and thanked both of his friends for their contributions. Since then Kevin identifies the trends and he gets the Right Answer! every time.
He applied the same method to these plunges,
- On 6 July 2009, the sensex fell by 869 points to 14,043.
- On 6 Jan 2015, the sensex fell by 854 points to 26,987.
- On 24 August 2015, the BSE Sensex crashed by 1,624 points and the NSE fell by 490 points.
- On 2 February 2018 the BSE sensex had fallen by 570 points to 35,328 and the NSE Nifty by 190 points to a low of 10,826.
He observed that these were minor crashes and he is always prepared to observe when the next crash happens.
That’s how Kevin has conquered the Stock Market!
Note: Without proper knowledge about the stock market never try to dive in. With every good thing, there is a dark side, the Indian stock market is the fastest wealth destroyer also in case you invest without proper knowledge about how it works. Here, if one is making BIG means on the other side somebody is BIG.