Market Overview: Nifty 50 Futures
Nifty 50 near a Big Round Number. The market closed strongly bullish on the weekly chart, but the candle has a small body. It continues to trade within a tight bull channel, making it difficult for bears to profit. The price is also near the significant round number of 25,000, so traders should plan their entries accordingly. On the daily chart, the Nifty 50 is forming a triangle pattern. Both the bull and bear bars are equally strong, indicating a 50-50 chance of a breakout in either direction.
Nifty 50 futures
The Weekly Nifty 50 chart
- General Discussion
- Traders who are in a long position can continue holding, as the market is still trading within a strong bull channel.
- Traders who shorted the fake bull breakout of the inside bar pattern can also continue holding, but with a tight stop-loss. A tight stop-loss is important here because the market is near a big round number, which increases the chances of a trading range forming.
- Traders not currently in a position can consider entering long positions at the lows of bull bars using limit orders, as small reversals are common near big round numbers.
- Deeper into Price Action
- When the market shows a strong breakout, traders can enter using stop orders — that is, by entering at the highs of bars — because the market tends to move quickly in these cases, increasing the risk of missing the breakout.
- When the market is inside a broad bull channel or a trading range, traders should use limit orders, placing buy orders at the lows of bars. This is especially true during a small trading range, where profit potential is higher when entering at lows compared to highs.
- Patterns
- When the market is near a big round number or another important level (such as support or resistance), it typically starts to show trading range price action.
The Daily Nifty 50 chart
- General Discussion
- Traders who bought near the low of the triangle pattern, assuming it to be a trading range, can exit their position on the next open. Since the chances of a breakout in either direction are roughly 50%, quick exits are usually better in breakout mode than holding for large swings.
- Traders who bought the close of the bull bar hoping for a breakout on the next open may hold their positions only if the market opens above the triangle pattern. However, if the market opens inside the triangle, it could be a trap.
- Traders who are not in any position should wait for a breakout or trade the triangle pattern like a trading range on a lower time frame.
- Deeper into Price Action
- Since both bull and bear bars inside the triangle look equally strong, and the market is near the big round number 25,000, the breakout chances are nearly 50-50 on either side.
- If the bulls manage a successful breakout, the market could rise based on the measured move of the bull flag. If there’s a bear breakout, the market might fall according to the measured move of the triangle pattern.
- Patterns
- To improve the chances of a successful trade in breakout mode patterns, enter the trade only after a strong follow-through bar appears.
- If, after a bull breakout, the market fails to give a strong follow-through bull bar and instead shows a strong bear close, traders can enter the failed breakout by taking a short position.
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