The Economic times has this interesting article on stock selection in a bullish market. The idea is to churns out is something like this.
When the markets are falling, people generally avoid buying stocks because they doubt that the stock prices would decline further, resulting in a loss or either they will wait to buy the stock at the lowest point. But that article argues that waiting to buy stocks at the lowest point may not be good decision because, less and less people sell stocks at the lowest point.
On the other hand, when the markets are dull, people don’t sell stocks because they doubt the stock prices would go higher or they wait for the stock prices to reach the highest point. And, here the article argues that at the highest point there would be less and less people willing to buy the stock and hence selling it at the highest price may not be possible, invest in stocks which are available at attractive valuations and have good growth prospects..
Due to this phenomenon, the article suggests that in a bullish market, buy stocks when the market goes down by 20%, rather than waiting for it to touch the lowest point and in a bull market, sell stocks when the markets goes up by 20% rather than waiting for it to touch the peak level. Also consider to get more information such as kind of business, quality of management and revenue visibility while buying and selling the stocks.
