A breakdown!

After remaining in a trading range, the Nifty saw a breakdown on Monday. The Index moved decisively below 4250 to close much lower.
[On Friday, the Nifty closed above 4400 resistance, but a big news event was ahead, so it was necessary to wait for the event before making a call on the move out of the range. As it happened, after the news, markets fell.]
Apart from the trading range breakdown, the Nifty also closed below the neckline of a bearish head and shoulder pattern. Depending on how you draw the neckline, the potential targets are between 3600 to 3800. This is a significant support zone for the Index. A drift down to these levels is likely.

Lessons learned:
1. Traders should wait to see the final impact from big news events.
2. Trading range breakouts / breakdowns offer significant trading opportunities, even after allowing for a false move.
3. Traders should ignore the hype created by electronic media. If you watch business channels, you will get the impression that they have the details of the budget before it is announced – STT will be abolished, Infra companies will be given tax benefits, short term capital gains tax will be reduced, —– all completely false and rubbish, as it turned out.