Investors should prepare for the worst as stocks risk pushing to new lows with sellers taking control of the market, Geoff Wilkinson, head of investment research at Mint Equities, told CNBC.
“Once you start printing new lows, then everybody who’s bought at the previous dips starts to lose money -- there’s a very different mentality,” Wilkinson said.
“That could precipitate some quite heavy stop-loss selling here,” he added.
Looking at the FTSE 100 and DJ Euro STOXX 50, Wilkinson says that the numerous failed attempts to rally are a bearish signal for the indexes. He likens to charts to a bouncing ball on a table that’s running out of steam as it nears the edge.
“There’s no real change in the trend here … and I think there’s a possibility that we may drop off the edge,” he said.
If the DJ Euro STOXX 50 breaks below 2,150 points, then it could fall another 10 or 15 percent, according to Wilkinson.
Wilkinson recommended buying “some puts that are out of the money. It’s not going to cost too much, but you’re going to get the security into your portfolio that you require.”
Watch the full Geoff Wilkinson interview above.