How to identify a stock market bottom


    How to identify a stock market bottom

  • 1 Bad news has no effect

    When a market bottoms the release of more bad news it usually doesn't affect the market anymore. In such a case, the market reaches a state where no more bad news can bring it down.

  • 2 Most stocks are undervalued

    When the majority of stocks sell below their true value then there is a big possibility that the market has bottomed or that it's about to bottom. See also why stock prices don't reflect business value.

  • 3 Most bad news have been reflected in the market

    When serious bad news happens the market will go down. When all the bad news has been reflected in the new stock prices the market is likely to go up again after some time.

  • 4 Low volatility

    Markets usually get very volatile before they bottom out. When a market bottoms the volatility becomes much lower, as the market stabilizes after most sellers exit. See also why do people lose money in stocks.

  • 5 Very negative expectations

    Usually, when a market bottoms very negative expectations are released, sometimes by very large institutes that say that the market will go much lower than it already has. See also the psychological factors affecting the stock market.

  • 6 Big difference between value and price

    When a big difference between the share price and a company's value appears it might mean that the market is very near the bottom. When this happens to multiple companies, opportunity hunters will show up and raise stock prices sooner or later.

  • 7 When prices are at historical lows

    Usually, during market bottoms stock prices reach historical lows. If stocks are selling at prices they were selling at years before, then the market bottom might be very near.

  • 8 When the majority recommends selling

    When the majority of people recommend selling stocks then the bottom might be very near. In such a case, most of those who wanted to sell with losses could have already left the market leaving a strong buying power behind.

  • 9 When everybody complains about serious losses

    When so many people start to complain about the serious losses they have made it could be a good time to start watching the market and waiting for the near bottom.

  • 10 When no more bad news is expected

    Sometimes, the market goes down because of serious bad news such as slowing down of the global economy. If all bad news about the slowdown has been released then only good news will start to show up and as a result the market will go up.

  • 11 Technical indicators indicate overselling

    When most technical indicators indicate that the market is oversold then it might be a good idea to look for other factors to find out whether the market is about to bottom. See signs the stock market is about to crash.