Nifty Breaks Down From Key Pattern; Option Strategy On IndusInd Bank With 1:2 Risk To Reward

Last week was undeniably dominated by the bears, with the Nifty 50 extending its decline for the sixth consecutive session. The index ended the week near its lows, registering a significant drop of 2.65%, marking its steepest single-week decline since February 2025.

Technically, the past six days of decline were impulsive in nature, evident from the fact that the index erased more than 75% of the over 1,000-point upswing in just six trading sessions. During this phase, the index recorded two distribution days and currently holds a total of three. As a result of last week’s fall, the Nifty is now trading below most of its key moving averages, except for the long-term 200-DMA. The Nifty currently trades 2.04% above the 200-DMA, which is at 24,161, providing significant support for the index.

From a time perspective, the correction from the all-time high is now 12 months old. Historically, many previous corrections have lasted within an 8–13 month period. Only on two occasions did the bear market extend beyond this, stretching up to 21 months. This suggests that, based on historical trends, the current corrective phase may conclude within the next month.

However, from a technical pattern perspective, the Nifty 50, which had been trapped in a broad symmetrical triangle pattern, has now experienced a breakdown from this formation on a weekly time frame, which is concerning.

Looking ahead, all eyes will be on the crucial support zone between 24,340 and 24,440. If the index falls below this, the next key support level is around 24,161, marked by the long-term 200-DMA.

The daily 14-period RSI has fallen below 40, and the MACD has triggered a fresh bearish signal. Additionally, the -DMI has sharply risen above both its previous high and the +DMI, signalling a clear dominance of the bears. On the weekly timeframe, the RSI struggled to break past the 60 mark, retreating from that level and subsequently slipping below its 9-week average. Additionally, the weekly MACD is signalling an increase in bearish momentum, with the -DMI crossing above the +DMI, further reinforcing the dominance of the bears. These technical indicators suggest that the downward pressure on the index may continue in the near term.

In conclusion, there is a high probability that volatility will continue to rise in the coming days. The critical support for the index remains in the 24,340-24,440 range. Any rally from this point is likely to be a relief rally unless the index can close above last Friday's high of 24,869.

Option Strategy on IndusInd Bank Ltd – Bear Put Spread

The stock of IndusInd Bank is showing signs of weakness on the charts, and with this bearish outlook, a Bear Put Spread strategy could be an effective way to capitalise on this anticipated decline.

A bear put spread strategy consists of two positions:

1. Buy 1 lot of 30 Sep 720 PE at Rs 13.70

2. Sell 1 lot of 30 Sep 700 PE at Rs 7.20

This strategy profits from a decline in the stock price, time decay (since overall theta is positive), and potentially increased volatility. The maximum profit occurs if the stock closes below Rs 700 at expiry, with the potential for a gain of Rs 9,450 per lot. On the other hand, the maximum loss is capped at Rs 4,550, resulting in a risk-to-reward ratio of 1:2.

Given the current negative technical view on IndusInd Bank, this strategy stands to benefit if the stock continues to slide. Holding the position until expiry, with the outlook of a further price drop, could result in reaching the maximum profit target with a favourable risk-to-reward setup.