Market Overview: Nifty 50 Futures
Nifty 50 Doji Close and Failed Cup and Handle Breakout on the monthly chart. The market this month formed a doji bar after a failed breakout attempt from the second cup and handle pattern, suggesting that bulls are taking profits near the all-time highs around 26,000. The failed breakout may lead to a test of the handle support area before the bull trend can resume, though the longer-term context remains bullish given the multi-year uptrend. On the weekly chart, Nifty 50 is trading inside a broad bull channel with increasing V-shaped moves and trading range price action near the upper channel line. The market is showing strong reversals in both directions with overlapping bodies, which tells traders that the always-in direction has shifted from long to neutral. Chances are that this choppy price action will continue until the market either breaks out above the recent highs with strong follow-through or pulls back to test the middle of the bull channel where value buyers may return.
Nifty 50 futures
The Monthly Nifty 50 chart
- General Discussion
- Traders who are holding a long position may consider holding through this doji month, though moving stops up to below the prior month’s low would reduce risk. The market remains in a strong bull trend on the monthly chart, and single doji bars often lead to continuation rather than reversal. However, the failed cup and handle breakout is a sign of weakening momentum, so bulls should be prepared for a deeper pullback.
- Traders who are holding a short position are in a low probability setup fighting the monthly bull trend. This doji month may offer a scalp opportunity for bears, but chances are that any selloff will be bought. Bears holding shorts should use tight stops above this month’s high and look to exit on the first signs of bull strength resuming.
- Traders who are not holding any position may wait for more price action before entering. Bulls may look to buy a pullback to the cup and handle support area around 24,000-24,500 with a stop below the cup low. Bears may attempt to sell above this month’s high if next month shows strong bear follow-through, but this would be a countertrend trade requiring a wide stop.
- Deeper into price action
- This month’s doji close is significant because it comes after a failed breakout attempt from the second cup and handle pattern. When a market fails to breakout from a continuation pattern in a strong trend, it often leads to a test of support before the trend can resume. The bodies of the last two months overlap, and the lack of bull follow-through after the brief new high is a sign that bulls are taking profits and bears are becoming more willing to sell.
- The failed cup and handle breakout tells us that the always-in direction may be shifting from long to neutral. While the monthly chart remains in a bull trend, the failure to hold above the prior highs suggests that the market needs to digest gains. Traders should watch whether next month trades below this month’s low—that would indicate bears have gained enough strength to create a deeper two-legged pullback in the bull trend.
- The trading range price action over the past several months, with overlapping bodies and doji bars, contrasts with the strong trending bars seen earlier in 2024. This is typical behavior when a market reaches new all-time highs and needs time to build energy for the next leg up. If bulls are going to resume the trend, they will need to create a strong bull breakout bar that closes near its high above the recent highs.
- Patterns
- The chart shows two cup and handle patterns during this bull trend. The first pattern, which formed in 2024-2025, led to a successful breakout and measured move higher. The second cup and handle pattern attempted to breakout but failed, creating a potential double top around the 26,000 level. This failed breakout may lead to a test of the handle area or even the bottom of the second cup before bulls can attempt another breakout.
- The monthly chart is in a broad bull channel, with the market making higher lows and higher highs since 2021. However, the recent doji and failed breakout suggest that the market may be entering a trading range at the top of this channel. If the market trades sideways for several more months with overlapping bars, traders should expect a breakout in either direction, though the context of the larger bull trend favors an eventual upside breakout.
The Weekly Nifty 50 chart
- General Discussion
- Traders who are holding a long position may consider taking partial profits near the top of the broad bull channel and moving stops up to below the most recent higher low. The market is showing V-shaped reversals and trading range price action, which means bulls should expect sudden selloffs even though the broader trend remains up. Bulls may hold the remainder of their position with a stop below the trading range low, betting that the channel will continue higher.
- Traders who are holding a short position from the recent highs should be prepared to exit quickly, as the broad bull channel context makes this a countertrend trade. Bears may hold shorts with a tight stop above this week’s high if they believe the market will test the lower part of the trading range. However, chances are that any selling pressure will be met with buying, given the strength of the bull channel over the past two years.
- Traders who are not holding any position may wait for a clearer signal before entering. Bulls may look to buy a pullback to the middle or lower part of the current trading range with a stop below the range low. Bears may sell at the top of the bull channel if next week shows strong bear follow-through, but this would require a wide stop and should be treated as a scalp. The best trades in a broad bull channel are buying pullbacks, not shorting rallies.
- Deeper into price action
- The recent V-shaped moves tell us that the market is in breakout mode rather than trend mode. When a market makes sharp moves in both directions with little follow-through, it is typically transitioning between trading range behavior and trending behavior. The overlapping bodies and consecutive reversals indicate that both bulls and bears are taking quick profits rather than holding for swing trades. This type of price action often continues until one side gives up, leading to a breakout from the range.
- The broad bull channel has been intact since early 2024, with the market respecting both the channel top and bottom. However, the recent trading range price action near the upper channel line suggests that bulls are having trouble sustaining breakouts to new highs. When a market stalls at the top of a bull channel and begins to trade sideways, traders should watch for either a breakout to a new high with strong follow-through, or a deeper pullback to the middle of the channel where value buyers may step in.
- The strong bear bars followed immediately by strong bull bars show that the always-in direction has shifted from long to neutral. In a strong bull trend, bear bars would be followed by small pullbacks before resuming higher. Instead, we are seeing immediate reversals, which is typical trading range behavior. Traders should be cautious about swinging positions in this environment and instead focus on scalping at the edges of the range until the market breaks out with conviction.
- Patterns
- The broad bull channel is the dominant pattern on this weekly chart. Bull channels are stronger than tight channels because the pullbacks create uncertainty, shaking out weak bulls and attracting new buyers at better prices. As long as the market continues to make higher lows along the bottom of this channel, traders should assume the always-in direction will eventually shift back to long. However, if the market breaks below the channel bottom with a strong bear breakout bar, it would signal the start of a deeper correction or possible transition to a trading range.
- Within the broader bull channel, the market has formed a trading range over the past several weeks. This range is characterized by overlapping bars, V-shaped reversals, and a lack of follow-through in either direction. Traders should expect this range to continue until there is a breakout, and the probability slightly favors an upside breakout given the bull channel context. If the market breaks below the range low, it would likely test the lower part of the bull channel before buyers return.
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