Nifty Breaches Key Support Trendline at 25,980; Bear Put Spread Strategy Recommended
Nifty has declined sharply from all-time highs of 26,373 to 25,860 zone, breaching a key rising support trendline at 25,980. The trendline connected swing lows from early November (25,318) and mid-December (25,693), defining short-term bullish structure. Technical analysts recommend bear put spread strategy to capitalize on bearish bias following the decisive breakdown.
*this image is generated using AI for illustrative purposes only.
The Nifty has witnessed significant selling pressure, falling sharply from its all-time high of around 26,373 to the current 25,860 zone. This decline has resulted in a decisive breach of a key technical support level, prompting analysts to recommend bearish options strategies.
Technical Breakdown Analysis
From a technical perspective, the index has breached a crucial rising support trendline positioned near 25,980. According to Sahaj Agrawal, Senior Vice President at a leading brokerage firm, this trendline had been instrumental in defining the short-term bullish structure of the index.
| Technical Parameter: | Details |
|---|---|
| All-time High: | ~26,373 |
| Current Level: | 25,860 zone |
| Breached Support: | 25,980 |
| Previous Swing Low 1: | 25,318 (early November) |
| Previous Swing Low 2: | 25,693 (mid-December) |
The trendline connected two significant swing lows - 25,318 from early November and 25,693 from mid-December. The breach of this support structure indicates a potential shift in the index's short-term trajectory.
Bear Put Spread Strategy
Given the bearish technical setup following the trendline breakdown, analysts are suggesting the deployment of a bear put spread strategy in Nifty options. This strategy is designed to capitalize on the current bearish bias while limiting downside risk.
The bear put spread involves buying a put option at a higher strike price while simultaneously selling a put option at a lower strike price. This approach allows traders to benefit from moderate downward movement in the index while maintaining a defined risk-reward profile.
Market Implications
The decisive breach of the rising support trendline represents a significant technical development for the Nifty. The breakdown from levels that had previously provided support suggests that the index may face continued selling pressure in the near term. The fall from the all-time high of 26,373 to the 25,860 zone represents a notable correction that has altered the technical landscape for the benchmark index.
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