*Understanding Shakeout, Correction, and Crash in Smallcap Ind | ACEink Official

*Understanding Shakeout, Correction, and Crash in Smallcap Index*

*Shakeout:*

- Less than 10% correction in 10-20 sessions.
- Quick 3-4 day drop with Index falling by 5-10% and many stocks correcting by 15-25%.
- Stop losses are difficult to execute.
- Followed by a quick pullback and sharp recovery into new highs.
- Consolidation post-shakeout implies lower volatility and low-volume boring period.
- Does not break the last 2 swing lows.

*Correction:*

- Break below the lows of the shakeout or recent swing lows confirms a correction.
- Recovery post-shakeout is not sharp.
- Test of the 2nd swing low and mainly the last 3-9 months low.
- Correction could range from 10-20-25%.
- Post the drop, consolidation may occur.
- Corrections follow multiple shakeouts in a trend.
- More shakeouts indicate a need for caution in buying the first dip.

*Crash:*

- Break below the 2nd swing low or two lower bottoms confirms a major trend change.
- Last 6-9 month lows get taken out.
- Recovery is feeble and cannot sustain much above the 2nd bottom.
- Crash is generally more than 20% and towards 30-70% eventually.
- Wait for a reversal and break above the 2nd swing highs or a classical double bottom or other patterns to confirm a trend change.

Disclaimer : This is not an investment advice and this is not an investment recommendation.