How to determine a bull market or a bear market?

Short Answer

Bull markets are identified when the stock sees a rally in its price, increasing, and there are lesser chances of it crashing. Conversely, a Bearish market is when the stock market plunges, and the stocks lose its value due to several reasons affecting its performance. Mostly the color green on a stock market chart is bullish, and the color red is bearish. However, these are prolonged over a couple of days to determine the nature of the market.

Detailed Answer

The stock market as one of two natures; bullish or bearish. These are the trends in which the market tends to react to any situation that directly or indirectly affects its functioning. However, can one understand the market being bullish or bearish? Well, let's dive deeper into this and understand its definition in detail.

Bull market

A bull market is the phase in a stock market where there is greater appreciation towards the value of a stock and robust economic growth in the country. Moreover, investors' confidence isn't lost in the company while the company is performing strong and reporting profits repeatedly.

Investors during a bull market tend to book their profits and try to literally short sell (keeping a share for a short period and selling it for a profit when the price of stock rises) to make a quick buck in the markets. However, not all profit from the bull market. Other sectors of the stock market might still have an economic downturn due to some economic or political decisions made by affected businesses. You lose some; you gain some type of approach.

Bear market

A bear market is where the stock market loses its appreciation. Its where companies are reporting losses, lay-offs of employees is at an all-time high; economic growth is a slump, and so on. Some factors are simply pulling the stock market down.

Investors and traders often see a bear market as an opportunity to buy more and invest in companies with a large market cap to sell it once the stock market recovers. However, intraday trading is quite difficult as you never really know when the market would slump even more. Therefore, going long during a bearish market is advisable.

How to determine whether the market is bearish or bullish?

Determination of the bearishness and bullishness often comes down to the functioning of the stock market. If there is a considerable rise in NIFTY and BANK NIFTY charts, then it's a bullish market where short selling is quite profitable and booking your trades is feasible. However, if these charts show a downfall with no signs of recovery, then it's a bearish market. If the stock market chart that you are analyzing is going up or green in nature, then it's a bullish market that breaks the resistance and support lines to scale higher. However, if it fails to break the resistance and support lines, it's a bearish market.

Conclusion

Nowadays, investors are more concerned about short-selling than going long. It’s because of the pandemic, and making short money many times does help as you have booked your profits and don't have to worry about anything else. However, always have a keen eye on the stock market and see its trends from the past week or so with the help of chart patterns to determine where the market might be heading in the future.

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