Condition: If Nifty is more than 60% away from its 91Days Moving average on monthly chart. We tend to see a correction of around 20-30% from Top.
Explanation: As seen on Chart there are 7 scenarios (numbered on chart black 1-5 and Red-1 & -2) where Nifty’s Monthly High was more than 60% away from its monthly 91Days Moving average. Every time Nifty has an over Up run it tends to fall and loose at least 20-30% from the Top. In Event based Scenarios (Dot Com bubble, Lehmann Crises and Covid Fall) Nifty has even fallen below 91 EMA (Monthly) (Marked with RED Circle on Chart). Only twice (in May 2006 and Jan 2007) the said condition was fulfilled and nifty fell only 8-12%. (Marked with -1 and -2 on Chart) Rare Case: Jan2020 where Nifty was just 38.5% above 91Days Moving average and still fell below its 91 EMA (Monthly). Note here our condition was not fulfilled and still fall happed. (Covid fall) Rest all the cases (marked on chart without numbers) nifty High is less than 60% away from its 91 EMA (Monthly) nifty did not give any correction.
Conclusion: If we seen current scenario, Nifty is already 64% away 91Days Moving average. Hence, going forward Bullish Traders needs to be careful. A sharp correction of 20-30% is due in market. I am “not saying” that correction will happen this month or next month or next quarter. But there is a high probability that it may happen soon since Nifty / Market cannot keep running up in straight line. And if we notice monthly charts, since April 2020 Nifty has not shown correction in any month and just running in straight line which is Insane.
Note: I am still bullish (as per shorter time frame), but expecting a Sideways or correction move soon.
Thank you . Kindly also educate as how conditions are arrived at. Is this your practical experience in trading/investment.
Does this rules is valid on any stock or only applies to Nifty. Pl do suggest. it is the most easy method to observe, taking 200 MA as base.
what could be similar rules for weekly time frame also. in that case if we take 50 MA or more . Please share your experience.
SagirKazi
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@JagdishKumarPahuja,
Yes , Such type of calculations can be drawn by experienced traders only.
This Rule is applicable in Heavy Weight Index such has Nifty or Bank Nifty only. For Stock do not use such calculations as they have there own sentiments and momentum.
if you are using 200MA then use shorter time frame like Weekly or Daily only. As seen in my chart 200 MA on Monthly chart was not able to give any sensible conclusion hence 91MA was used by me.
ckirtane
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last 13 years nifty has corrected in September by 5-10%. this time also it will do the same but first it may complete its up-move to 18300/400 & then go down to 16500.
SagirKazi
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@ckirtane, i have a traget of 17500 above that every thing is bonus to me
will have to wait and watch correction happens in September or October
kunalksr28
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everybody knows ki corection hogi.....but kab ye koi nhi jaanta
Does this rules is valid on any stock or only applies to Nifty. Pl do suggest. it is the most easy method to observe, taking 200 MA as base.
what could be similar rules for weekly time frame also. in that case if we take 50 MA or more . Please share your experience.