The Nifty arrived at a do or die junction. The 10,076 level must hold if our bullish ending diagonal scenario (depicted in black) plays out eventually.
The alternative is depicted in red. A break of yesterday's low most likely implies an attack of the 10,076 level. Moreover, it is critical to recognize that the red count suggests a third wave to the downside. We do not want to be caught with the wrong position within a third wave. Evidence starts building up for the red case if the 10,141 and 10,076 levels get crossed to the downside.
Both scenarios are equally possible at this stage. However, the entire setup translates into an attractive risk-reward situation. The stop-loss around for the red scenario is less than 200 points away and a potential fifth wave is more than 1000 points to the upside. That's a 1:5 risk-reward setup.
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Guys, we have accidentally labeled 10,076 as the key level. This is incorrect. Simply mixed it up with minute wave iv(circle). The correct key level is 10,033 for the expanding diagonal. Many thanks to @praveenshamain for seeing that on twitter.
The S/L is 10,033
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Guys, the trade idea can be optimized at this point. We trail our S/L up to the previous low 10,140. We expect a further attack of the 10,033 key level if 10,140 does not hold. It is usually better to protect capital and watch from the sidelines in such cases. The potential risk/reward ratio of the initially executed trade increases to more than 1:10 (s.t. execution risk) by this action.