NIFTY/Sensex-- Is it a pennant?

If we just check the price action, the answer is a big yes with support coming from similar pattern in a number of frontline stocks like Reliance, Infosys, M&M, LT, etc. Some people may argue about triangles vs. pennants but then duration of pattern may provide the answer. But IMHO none of the these two patterns should be accepted as valid.

Fall in activity level is the first and formost criteria for a pennant/flag to be successfu. High or zig-zag volume during the pattern formation of such kinds may even cause reversal of trend. If we look at the NIFTY Futures volume, we can see that instead of decrease in activity, volume has gone up.

So the question is how do we trade if Nifty continues its downward journey. The answer lies in Fibonicci Extensions.

For charts click here.