History Of Nifty Corrections

Nifty is in correction mode. If we go by the history of Nifty it has tendency to correct to 200 EMA . It has done so many times .It has traded below 200 EMA and then bounced back. We are presenting below Nifty daily chart:

Nifty is trading below 50 EMA and you can see it has breached a short term trend line . As per dow theory now the next support is at 5930 which can also be taken as Pivot. If you look at the chart the support area as per the candles is around 5900. If Nifty is unable to trade above 5900 then it may retest 200 EMA.

You can also see that in recent past it has traded below 200 EMA and then bounced back. Therefore, looking at the history one should be prepared for this eventuality. If Nifty on any day closes below 5900 then one should exit from all long positions . At present global and domestic environment are not conducive for a sharp upside . Food inflation is here to stay despite the tightening measures being taken by all the Central Banks. One of the major culprit for this is the climate change which is resulting in fickle weather, untimely rains. Of late , rains in Maharastra has led to sharp rise in onion price. The flooding in Pakistan and Thiland has caused  rice price shooting up .