NIFTY 50 — Buy the Dip (or) Wait Further?

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This blog is all about timing the market — ‘Buy The Dip’ or ‘Wait Further’!

The NIFTY 50 or N50 is a benchmark Indian stock market index representing the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. NIFTY 50 is one of the two leading stock indices used in India, the other one being the BSE SENSEX.

With N50 correcting almost 8% in a month and 10% year-to-date, investors are anxious to know how to time the entry or wait further.

If the bears continue due to broader market sell-offs, the next likely support is around 14440. I have indicated various support levels where NIFTY 50 may rebound. No one can predict how far the fall will be except the market movers. We are about to see where precisely the index rebounds and follow specific steps based on price action and technical indicators. One can apply a similar strategy to any ETF, stock, or cryptos.

When you attempt to draw support/resistance lines, it is better to try using weekly or monthly timeframe charts. 

Investors should not jump when the index or a stock jumps up just a day or two. Regarding long-term investments (not trading), I suggest confirming the trend reversal in two different time frames — preferably on a daily and weekly chart. More conservative investors may opt for confirmation on a monthly chart.

The sideways movements are confirmed by choppiness indicated by the moving averages, where the 20-day EMA and 50-day EMA have been whipsawing too frequently. NIFTY 50 confirms its bearishness as it trades below 200-day EMA, and watch out for the dead-cross where the 20-day EMA crossed below the 200-day EMA — which double confirms the bearishness.

  1. Wait to confirm the price action by support/resistances
  2. Wait for the MACD to indicate a change in momentum from bearishness to bullishness (at least in two different time frames)
  3. Wait for the moving averages to confirm the bullishness by a golden cross
  4. Deploy the first part of your capital when the 20-day EMA cross over the 200-day EMA and deploy the next part when the 50-day EMA crosses over the 200-day EMA.

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