Before i start on this post let us first look into why people use 200 day moving average.
The basic premise of 200 days moving average was that there are around 200 trading days in a year.
Over the last century it has changed to 250 days in a year but we still use the 200 day moving average because the world does it.
Also why do we not use a 199 or a 201 day moving average.
In that sense there is no solid reason as to why one should use a 200 day moving average but the major reason we use it is because its a reference level for a lot of people in markets.
This makes it clear it is not an exact support or resistance price as you will see in the chart below but a dip to same in bull market implies a good price and time wise correction and can be used to deploy fresh cash in a long term bull market.
Nifty is now finally getting closer to the 200 dma.
Time to get ready with a list of stocks and wait for good entry points.
In the next post will either write a lengthy post or make a video on what have been the reactions from the 200 dma on Nifty.
