Market Overview: Nifty 50 Futures
Nifty 50 bear channel on the weekly chart and Nifty 50 is also forming a micro double top pattern. This week’s market showed an impressive bear bar that closed close to the low, possibly attracting some bears to sell and anticipate a micro double top and measured move down.
On the daily chart, the Nifty 50 is trading within a potential trading range between the high and low of the surprise bar; some characteristics of a trading range include sharp moves up and down.
Nifty 50 futures
The Weekly Nifty 50 chart
- General Discussion
- With stop orders and targets for the potential micro double top measured move down, some bears would be shorting at the low of bar 1.
- Because the market is trading at the bottom of the bear channel, some bears would not sell at the low of bar 1.
- The market has experienced a lot of trading range price action over the past 10 bars, which has led some bulls to place limit orders to buy at the low of bar 2.
- The probability of a successful bear breakout of a bear channel is only about 25%, which results in a positive traders equation, giving bulls another reason to buy with a limit order below bar 2.
- Deeper into the price action
- If you were to look at the last ten bars, you would see that many of them have small bodies and tails above and below.
- Other signs of a developing trading range include large, powerful bear and bull bars not getting good follow-through.
- There is less chance that the market will reach the micro double top measured move down. The likelihood of a bear channel successfully breaking out is typically around 25%, and there is a 75% chance that it will do so within a few bars of the breakout.
- The market is currently trading within a narrow bear channel; in a bear channel, bulls prefer to buy with limit orders close to the low, or the channel’s bottom trendline.
- A small trading range can be anticipated by buyers if the next bar the market forms is a bull bar. This is because strong bear bars have followed bull bars in the previous 10 bars, and bear bars have not received good follow-through.
The Daily Nifty 50 chart
- General Discussion
- Since the market is currently trading close to the surprise bar’s low, which is shown in the above chart and has a very long tail at the bottom, limit order buyers are expected to be present.
- Leg 2 is a very strong bear leg, and some bears believe the market will form a second leg down. These bears may sell at a Low 1 in anticipation of a second leg down.
- Deeper into price action
- As you can see, legs 1 and 2 both have strong sharp moves up and down, and subsequent sharp moves on either side typically result in a trading range.
- The daily chart is currently in a downtrend, but if strong bull legs like leg 1 start to appear, this will eventually cause the bears to lose interest in selling the market and draw more bulls to buy it – turning it into a trading range.
- Big surprise bars that occur late in a trend typically have a higher likelihood of creating a trading range. In the example above, these chances are increased by the surprise bar’s lengthy upper and lower tails.
- The likelihood of a large triangle pattern (shown by the pink dotted line) is higher if bulls are successful in pushing the market higher from its current price.
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