NIFTY Symmetical Triangle Pattern tgt 4840 CMP is 5600 Breakdown

Trading Call: Sell at the level of 5590 Stop Loss of 5750 Target of 5350 – 5100 - 4840 levels.

A symmetrical triangle pattern is relatively easy to identify. In addition, triangle patterns can be quite reliable to trade with very low failure rates. There is a caution concerning trading these patterns, however. As mentioned previously, a triangle pattern can be either continuation or reversal patterns. Typically, they are continuation patterns. To achieve the reliability for which the triangle is well known, technical analysts advise waiting for a clear breakout of one of the trendlines defining the triangle.

1. Occurrence of a Breakout - Technical analysts pay close attention to how long the triangle takes to develop to its apex. The general rule, as explained by Murphy, is that prices should break out - clearly penetrate one of the trendlines - somewhere between three-quarters and two-thirds of the horizontal width of the formation.6 The break out, in other words, should occur well before the pattern reaches the apex of the triangle. . Adherence to this rule is strongly advised by Yager, She adds that the closer the breakout occurs to the apex the higher the risk of a false breakout.

2. Price Action - Unlike ascending and descending triangles which give advance notice of their intentions, the symmetrical triangle tends to be a neutral pattern. Murphy advises that the symmetrical triangle is generally a consolidation pattern. This means an investor can look to see the direction of the previous trend and make the basic assumption that the trend will continue. However, many experts advise investors that because the breakout direction could go either way that they wait until the breakout occurs before investing in or selling the stock. Schabacker refers to a symmetrical triangle as a "picture of hesitation.

3. Measuring the Triangle - To project the minimum short-term price objective of a triangle, an investor must wait until the price has broken through the trendline. When the price breaks through the trendline, the investor then knows whether the pattern is a consolidation or a reversal formation. To calculate the minimum price objective, calculate the "height" of the formation at its widest part - the "base" of the triangle. The height is equal determined by projecting a vertical line from the first point of contact with the trendline on the left of the chart to the next point of contact with the opposite trendline. In other words, measure from the highest high point on one trendline to the lowest low point on the opposite trendline.

Both these points will be located on the far left of the formation. Next, locate the "apex" of the triangle (the point where the trendlines converge). Take the result of the measurement of the height of the triangle and add it to the price marked by the apex of the triangle if an upside breakout occurs and subtract it from the apex price if the triangle experiences a downside breakout.

For example, working with a symmetrical triangle, assume the highest high of the pattern occurs at 100 and the lowest low at 80. The height of the pattern is 20 (100 - 80 = 20). The apex of the triangle occurs at 90. The pattern has an upside breakout. Using the measuring rule, the target price is 110 (90 + 20 = 110).

4. Duration of the Triangle - As mentioned before, the triangle is a relatively short-term pattern. It may take up to one month to form and it usually forms in less than three months.

5. Forecasting Implications - Once breakout occurs, the symmetrical triangle tends to be a reliable pattern. Bulkowski calculates failure rates ranging between 2% and 6% for symmetrical triangles after a valid breakout.

To avoid mistaking a false move for a valid breakout, experts advise waiting a few days to see if the breakout is dependable. According to Murphy, minimum penetration criteria would be a closing price outside the trendline and not just an intraday penetration. Investors do have time once a breakout has occurred.18 According to Bulkowski, when considering symmetrical triangles, an investor will have over five months to reach the ultimate high after an upside breakout and less than half that time after a downside breakout

Because premature breakouts (where prices close outside of the trendline) are so common, don't dismiss the pattern if it has experienced such a breakout. According to Bulkowski, however, "premature breakouts do not predict the final breakout direction or success or failure of the formation."

NIFTY, working with a symmetrical triangle, the highest high of the pattern occurs at 6240 and the lowest low at 5480. The height of the pattern is 760 points (6240 – 5480 = 760). The apex of the triangle occurs at 5600. The pattern has an down side breakout. Using the measuring rule, the target price is 4840 (5600 – 760 = 4840).

With the above move it is also showing A-B-C Pattern Formation where it is expected to test 161% expansion of A-B from point C which comes to 5002 levels. Point a is at 6240 & Point b is at 5560, point c at 6110 has given retracement of 76.4% of the rise and confirming the Down side target. Taking 161.8 % Fibonacci Expansion of the A to B from the point C, comes to lower level of 5002 which can be seen in near term.

I maintain Sell call from the previous report generated at 6050 for target of 5600 and now I am still looking at 5000 to 4840 which is expected and still expect it to move lower. On lower side support of 4800 and if the same support is also broken then might look at 4200 - 3800 in long term, where further panic selling might take it to 2600 which is 2008 lower level.