Who catches a Falling Knife*?

Germany – DAX (9980) Target (9700)

DAX and it fell to a low of 9810 yesterday. With this it has corrected 1047 points from the recent high of 10857 within 5 trading sessions. DAX is trading below 200 DMA which was broken with a huge down side gap.

France – CAC (4403) target (4280)

Yesterday, CAC opened with a huge down side gap and made a low of 4323. However, it recovered and rallied to 4424 before settling at 4403, closing is 77 points lower. With the fall, it has corrected 385 points within 5 trading sessions and has entered into lower trading range. Oscillators and trend following indicators continues to support the down ward move. Daily MACD is in sell mode and stochastic is falling.

UK – FTSE 100 (5903) Target (5800)

On expected lines price cracked severely lower yesterday after opening on a flat note. Index finished lower by 158 points towards the close. Broader chart shows another lower top formation at 6323 followed by resumption of fall during the last few trading days. In daily momentum studies daily oscillators have now reached overbought territory. The stochastic has given a sell signal at overbought territory while the RSI (14) and M.A.C.D indicator hovers around mid range. For the coming days resistance to the up move comes at 6450 followed by major resistance at 6650.Support below comes at 6000 followed by major support at 5850.

India – NIFTY (7568) Target (7450)

Backed by Global sell off, Nifty opened with a down side gap and fell down to 7556 yesterday. It sustained downward move till the end with total absence of any bounce back during the day. The upside gap between 7700-7715 remains unfilled as the index has opened below this gap. Thus the area above this gap now can be considered as an “Island” and the move can be considered as an “Island Reversal”. Nifty has corrected 416 points within 4 trading days and has fallen to the level of 7550 once again. Daily MACD is in sell mode. Daily stochastic is falling and index is below 13 & 30 DMA. However, with the fall, Nifty has reached at major support of 7550 and aggressive traders may book part profit in short position near this support.

*'Falling Knife'

A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time.

As the phrase suggests, buying into a market with a lot of downward momentum can be quite dangerous. If timed perfectly, a buy at the bottom of a long downtrend can be rewarding - both financially and emotionally - but the risks run extremely high. This term implies that the investment will never be a good one again. Examples of stocks that have plummeted are plentiful; a widely-held stock can drop precipitously as the equity ownership is reduced to nothing.

Read more: Falling Knife Definition | Investopedia 

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