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Nifty 50 Head and Shoulders

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Market Overview: Nifty 50 Futures

Nifty 50 Head and Shoulders pattern on the weekly chart. The market has completed a major head and shoulders top with the head reaching above 26,200 and both shoulders forming near 26,000. Price has broken below the neckline with strong bear bars and follow-through, and the measured move projects down to around 23,000, which aligns with prior support levels. Traders may expect any rallies to fail around the neckline or trend line resistance, creating short entry opportunities. On the daily chart, Nifty 50 is testing major support near 24,600 after a strong bear channel selloff. The market is showing long tails at the support zone, which suggests bulls are attempting to defend this level, but the strong bear momentum and large bear bars closing near their lows indicate that bears remain in control. If price breaks below this major support with conviction, chances are that the selling will accelerate toward the weekly measured move target.

Nifty 50 futures

The Weekly Nifty 50 chart

Nifty 50 Head and Shoulders
  • General Discussion
    • Traders who are holding a long position may consider exiting or at minimum moving stops to breakeven. The head and shoulders pattern has completed with price breaking below the neckline, and chances are that the market will continue lower to reach the measured move target. Bulls who are still holding may wait to see if this week closes back above the neckline before deciding whether to hold.
    • Traders who are holding a short position may continue to hold with stops above the right shoulder high or the head. The market is showing follow-through after the neckline break, which is a sign that bears are in control. Bears may also consider taking partial profits near the measured move target and holding the rest with a wider stop.
    • Traders who are not holding any position may look to enter short on a pullback to the neckline or trend line resistance. A second entry short after a failed breakout above the neckline would be a high probability setup. Aggressive traders may enter short at the market with a stop above this week’s high, while conservative traders may wait for a rally to resistance.
  • Deeper into price action
    • The market spent several months forming the head and shoulders pattern, which indicates that this is a significant top. The head reached above 26,200 while both shoulders formed near 26,000, showing that bulls made three attempts to break higher but failed each time. When a market forms multiple tops at approximately the same level, chances are that there are trapped bulls above who will sell if price rallies back up, creating resistance.
    • The break below the neckline shows strong bear bars with follow-through, which is what bears need to see for the pattern to be credible. If the breakout had weak bars or overlapping bodies, chances are that it would fail and the market would reverse back up. The fact that bears are getting strong closes and continuation lower increases the probability that the measured move will be reached.
    • The measured move target projects to around 23,000, which also aligns with a prior support zone from earlier in the chart. When a measured move target coincides with other support levels, chances are that the market will reach that area. Traders may look for a bounce or reversal setup once price gets near the measured move target, as bulls will likely attempt to buy the selling climax.
  • Patterns
    • The head and shoulders pattern is one of the most reliable reversal patterns when it forms after an extended bull trend. The market rallied in a broad bull channel for over a year before forming this top, which suggests that bulls are exhausted and bears are ready to take control. The measured move from the head to the neckline projects the expected distance of the move lower.
    • After breaking below the neckline, the market is now in a bear trend with lower highs and lower lows. Traders may expect any rallies to fail around the neckline or the trend line that connects the shoulders. These failed breakouts above would create short entries for bears who missed the initial breakdown.

The Daily Nifty 50 chart

Nifty 50 Market Near Major Support
  • General Discussion
    • Traders who are holding a long position may consider exiting if the market breaks below the major support zone with strong follow-through bars. Bulls who bought higher are likely trapped, and if this support fails, chances are that the selling will accelerate. Those still holding longs may place stops below today’s low or below the support zone, depending on their risk tolerance.
    • Traders who are holding a short position may take partial profits near the major support level and hold the rest with stops above the bear channel trend line. The market has shown strong bear momentum, but support zones often create bounces that can test stops. Bears may also consider exiting completely if price starts forming strong bull reversal bars at support.
    • Traders who are not holding any position may wait to see how the market reacts at this major support before entering. If bears get strong closes below support with follow-through, aggressive traders may enter short with stops above today’s high. If bulls defend the support with strong reversal bars, traders may look to enter long with stops below the support zone, targeting a bounce back to the bear channel trend line.
  • Deeper into price action
    • The market has been in a bear trend since breaking down from the trading range near 26,500, and the recent selloff shows increasing momentum. The bear bars are getting larger and showing strong closes near their lows, which is a sign that bears are in control and bulls are not willing to buy yet. When bears get this kind of momentum, chances are that any bounce will be sold and the market will continue lower.
    • The major support zone around 24,600 has been tested multiple times over the past year, and each time bulls were able to push price back up. However, the current approach to support is different because the market is coming down in a strong bear trend rather than from a trading range. If bears can break below this support with conviction, chances are that there are no significant buyers until much lower levels.
    • Today’s price action shows the market testing the support zone with long tails, which indicates that bulls are attempting to defend this level. If tomorrow shows a strong bull reversal bar closing near its high, that would be the first sign that bulls might create a bounce. However, in a strong bear trend, even strong reversal bars often fail, and the market continues lower after a brief pullback.
  • Patterns
    • The bear channel on the right side of the chart shows that the market is in a tight bear trend with consistent selling pressure. Bear channels typically continue until there is a break above the channel trend line with strong bull bars and follow-through. Until that happens, traders may assume that any rallies within the channel are selling opportunities for bears.
    • The major support zone is a key decision point for the market. If price breaks below this support, the next target would likely be a measured move based on the height of the recent trading range or the bear channel. Conversely, if bulls defend this support, the market may enter a trading range between this support and the 25,500-26,000 resistance area above.

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