Nifty Overvalued on Monthly Chart
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.
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.
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