Market Overview: Nifty 50 Futures
Nifty 50 Cup & Handle on the weekly chart. This week, the market closed with a strong bearish tone and is currently trading within a wedge and a bear channel. Over the past eight weeks, the bears have managed to produce strong bearish bars but have struggled to achieve follow-through, increasing the likelihood of a trading range rather than a reversal. On the daily chart, Nifty 50 is trading within a large trading range and is currently near the bottom of the range, with the market also forming a wedge.
Nifty 50 futures
The Weekly Nifty 50 chart
- General Discussion
- Traders holding a long position can continue doing so until the market forms another strong consecutive bearish bar.
- If the bears manage to achieve a strong bearish breakout with follow-through, the likelihood of a bearish reversal increases.
- Bears who shorted for a bearish reversal during consecutive bearish bars can continue holding their trades until the market forms a strong bullish bar. A strong bullish bar would suggest an increase in trading range price action and could mark the bottom of the trading range.
- Deeper into Price Action
- The first bearish leg in the bear channel was strong, while the current bearish leg is weak, lacking strong consecutive bearish bars.
- The current pullback is the deepest one the market has experienced since the beginning of the bull trend.
- Previous pullbacks were not as significant compared to the bull trend, but the current pullback is strong enough to potentially reverse the bull trend.
- Patterns
- The market is forming a cup-and-handle pattern. If the bears succeed in a strong bearish breakout with follow-through, a measured move down, equivalent to the pattern, is expected.
- The market is also forming a wedge pattern, but the chances of a successful bearish breakout are only around 25%.
The Daily Nifty 50 chart
- General Discussion
- Traders who sold the failed head-and-shoulders bull breakout can exit now, as the market is trading near the bottom of the range.
- Traders can consider entering a long position once the market forms consecutive bullish bars, targeting a measured move up based on either the wedge or the top of the trading range.
- Deeper into Price Action
- The market has formed several strong bullish and bearish bars, but these have failed to gain consistent follow-through. This behavior indicates a trading range.
- If the bears succeed in achieving a strong breakout of the range with follow-through, traders can anticipate a measured move down, calculated from the height of the range or the wedge pattern.
- Since the chances of a successful breakout in a trading range are 50-50, and the likelihood of a successful bearish breakout from the wedge bottom is only 25%, traders should wait for a strong follow-through bar after the bearish breakout before entering a short position.
- Patterns
- In most cases, failed head-and-shoulders breakouts evolve into a trading range that is approximately equivalent in size to the original pattern.
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