By Dipesh Ghimire
What is a Bull Market ?
A bull market is a financial market in which the prices of securities are rising or are expected to rise. It is characterized by a sustained increase in market prices, which encourages investors to buy more. A market is considered a bull market when it rises by 20% or more from recent lows. Bull markets boost investor confidence and motivate them to buy more securities.
The Journey of a Bull Market
The journey of a bull market is similar to climbing a mountain. Before ascending, climbers need to acclimatize themselves to the weather conditions at the base camp. In the market, the base camp is a sideways market, where the market spends some time consolidating.
Once the market establishes its base, the bull market begins. Small corrections may occur, preparing the market for the next rally.
Bull, Bear, and Sideways Cycles
The cycles of bull, bear, and sideways markets continuously repeat. In NEPSE (Nepal Stock Exchange), these cycles have been observed as follows:
1997-2000-2004: Bull 40 months, Bear 16 months, Sideways 24 months.
2004-2008-2012: Bull 52 months, Bear 34 months, Sideways 10 months.
2012-2016-2019: Bull 52 months, Bear 29 months, Sideways 12 months.
2019-2021-2024: Bull 20 months, Bear 10 months, Sideways 23 months.
History of Bull Markets in NEPSE
Bull 1 (1997-2000): NEPSE rose from 100 to 545, an increase of 445%.
Bull 2 (2004-2008): NEPSE rose from 195 to 1175, an increase of 502%.
Bull 3 (2012-2016): NEPSE rose from 300 to 1888, an increase of 530%.
Bull 4 (2019-2021): NEPSE rose from 1109 to 3198, an increase of 188%.
Leader Companies
Leader companies play a significant role in a bull market. These companies show greater growth compared to others in the market. They should be identified through fundamental and technical analysis. A leader company does not stay undervalued for long.
Some Bullish Tips
Prepare in the Bear Market: Recall the events of the previous bull market. Each bull market is different but shares many similarities. Avoid past mistakes.
Time and Growth May Vary: Markets always try to behave similarly, but many investors believe it will be different each time.
Enter and Exit at the Right Time: If you can't enter or exit at the right time, you may miss the opportunity.
Maintain a Winning Mindset: Your investing strategy and winning mindset determine your success.
Look for Opposite Opportunities: The bull market often gives opportunities to sell, and the bear market to buy. Look for the opposite opportunities.
Create a Template: Clearly define your buying and selling criteria. Maintain a journal of your trades.
Plan for Worst Case Scenarios: Market outcomes are random. Have a plan for worst-case scenarios.
Define Trader/Investor Role: Determine your holding period and risk capacity in advance.
React to the Market: Learn to react to market movements rather than predicting them.
Balance Technical and Fundamental Analysis: Do not rely solely on one type of analysis.
Follow Smart Money: Do not criticize big money (smart money); follow them.
Look for Multibagger Stocks: Try to find multibagger stocks (leaders).
Set Stop Loss: Always trade with a stop loss before your target.
Follow the Cockroach Effect: Like seeing one cockroach indicates many more, if one company in a sector is performing well, others may follow.
Ignore Surprise News: Do not get surprised by news during a bull rally.
Trust Your Eyes: Trust your analysis over external noise.
Listen to Your Brain: Use logic over emotions while trading.
Learn to Switch Sectors: Not all sectors perform at the same time. Switch to sectors showing strength.
Use Safe Investing Strategies: Do not use safe investing strategies for trading.
Be a Disciplined Trader and Patient Investor: A disciplined trader makes money, while a patient investor builds wealth.
Not all companies rise equally in a bull market. Due to sector rotation, different companies may rise at different times. Therefore, it's crucial to invest in the right companies at the right time.
To fully enjoy a bull market, prepare well during the bear market. Remember, success in a bull market requires planning, strategy, and the right mindset.
