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During the trading session on Friday, we have seen the Nifty 50 in India drop well below the 50 Day EMA. By breaking below the 50 Day EMA, this opens up the possibility of a drop to the ₹22,750 level, which coincides with the previous downtrend line that we have recently broken above. This shows just how chaotic the markets are in general, and obviously emerging market stocks might be a dangerous place to be in a situation where a tariff war is a very real thing.
Technical Analysis
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The technical analysis for this market is a bit mixed at the moment, because you can make an argument for increasing volume, suggesting that perhaps buyers are at least thinking about getting long and taking this market on. Furthermore, we had recently broken above the 200 Day EMA, which is an indicator that a lot of people will pay close attention to, but we have also fallen back below it, which is a negative sign. Finally, we have a downtrend line that is about to be tested, and if it holds, that might be the first signs that the Nifty 50 would turn around and rally significantly, perhaps for the long term. In other words, we have a lot of noise out there that could continue to frustrate traders in India.
Emerging markets are going to be a dangerous place to live right now, so you have to be very careful with your position size, as traders will have to be cautious about the latest headline. That being said, if there is a positive headline, smaller indices like the Nifty 50 could rip to the upside. Obviously, the exact opposite is also true. Nonetheless, the selling has been so brutal around the world that it seems like most traders are hoping for some type of good news, so the reaction to a good headline might be somewhat outsized in comparison to further negative headlines.
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