What is a 'Bear Market'
A market could be a condition within which securities costs fall and widespread pessimism causes the stock market's downward spiral to be self-sufficing. Investors anticipate losses as pessimism and marketing will increase. though figures vary, a downswing of 20% from a peak in multiple broad market indexes, like the stock market index Industrial Average (DJIA) or customary & Poor's five hundred Index (S&P 500), over a two-month period is taken into account AN entry into a market.
BREAKING DOWN 'Bear Market'
A market shouldn't be confused with a correction, that could be a short trend that incorporates a length of fewer than 2 months. whereas corrections supply an honest time for worth investors to seek out AN entry purpose into stock markets, bear markets seldom give appropriate points of entry. this can be as a result of it's nearly not possible to work out a bear market's bottom. {trying|making AN attempt|attempting} to recoup losses will be an uphill battle, unless investors area unit short sellers or use different methods to create gains in falling markets. Between 1900 and 2015 there have been thirty two bear markets, averaging one each three.5 years. The last market coincided with the worldwide money crisis, occurring between Oct 2007 and March 2009; the DJIA declined fifty four throughout the amount.
Short Selling in Bear Markets
Investors will build gains in a very market by short sale. this method involves marketing borrowed shares and shopping for them back at lower costs. a brief vendor should borrow the shares from a broker before a short-sell order is placed. The short seller’s profit and loss quantity is that the distinction between worth|the worth|the value} at that the shares were sold and also the price at that they were bought back, noted as "covered." for instance, AN capitalist shorts a hundred shares of a stock at $94.00. the value falls and also the shares area unit lined at $84.00. The capitalist pockets a profit of $10 x a hundred = $1,000.
Current Scenario of NEPSE
NEPSE plunged down from the peak of 1881 (july27,2016) to 1469 (nov 27, 2016), a fall of 412 points in last 4 months which is 21.90%. If we take last two month market has decreased from 1806-11469 which is equal to 337 points i.e.18.66%. Is it a bearish trend? Previously market increased from 1022 (Nov 29, 2016) to 1881 July 27, 2016) gaining 859 points up in eight months. Taking this 412 points fall is 47.96% decrease. In relating this to fibonacci series, In technical analysis, Fibonacci retracement is created by taking two extreme points (usually a major peak and trough) on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%. Fibonacci Retracements are ratios used to identify potential reversal levels. These ratios are found in the Fibonacci sequence. The most popular Fibonacci Retracements are 61.8% and 38.2%. Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%. After an advance, chartists apply Fibonacci ratios to define retracement levels and forecast the extent of a correction or pullback. Fibonacci Retracements can also be applied after a decline to forecast the length of a counter trend bounce.
According to Fibonacci we are at 50% is on 1451 points if it didn't bounce back 1348 points is Golden retrachment i.e 61.8%. The figure below might help you to understand.
