Let us analyze the price action from mid-July. As you can see, NIFTY has broken down the trend line “T “on Aug 14, which took it to near 4200, took support and rallied again. But the rally failed to take it above the prior peak of 4650 achieved on Aug 12. It has again turned down and moving downwards. Now, if NIFTY brakes down from 4200, the next level of accelerated drop will result. For a double confirmation, I looked for any price patterns and found a bearish Head and Shoulders pattern (Box). This is a highly reliable pattern. If the neck line “N is broken”, the pattern will get confirmed and a heavy drop will result which will take NIFTY to 3800 or beyond.
Now you can see that in both cases, NIFTY is nearing a breakdown confirmation and the confirmation point is 4200. Hence 4200 should be considered as an important Support.
In brief, NIFTY is approaching a dangerous move downwards.
Trading idea: For fresh positions..
Straddle at 4400:
What I mean is to buy Call and Put of 4400. This is for position trades and not for Intraday.
