Market Overview: Nifty 50 Futures
Nifty 50 Bull Channel Breakout on the weekly chart. Market gave a weak bear close this week on the weekly chart. After a strong bear breakout, the bears have struggled to get a solid follow-through, though they managed to secure two consecutive bear closes post-breakout. The market is not yet forming a micro double bottom. If the bears succeed in breaking out strongly from this pattern, the likelihood of reaching the measured move down, based on the height of the micro double bottom, will increase. On the daily chart, Nifty 50 is showing two major patterns: a head and shoulders, where the bears made a breakout but failed to follow through, and a wedge bottom.
Nifty 50 futures
The Weekly Nifty 50 chart
- General Discussion
- The market is currently trading in a strong bull trend. Recently, the bears executed a significant bear breakout of the bull channel, but they failed to achieve good follow-through bars.
- If the market forms a strong bull bar in the upcoming week, traders can consider entering on the high-1 setup.
- Traders should refrain from selling for the time being. It is advisable to wait for the market to first provide a second leg up, and then either enter on that leg or wait for a strong bear breakout of the micro double bottom.
- Deeper into Price Action
- It is important to note that the bull leg preceding the current pullback was strong, which increases the chances of a second leg up occurring before a potential reversal.
- After the strong bear breakout of the bull channel, the bears have struggled to gain strong follow-through. This indicates that there aren’t many traders interested in selling at the current price.
- Patterns
- The market is forming a micro double bottom. Given that the market has already executed a bear breakout of the bull channel, if the bears manage to achieve a strong close below the micro double bottom, the market may shift into a trading range
The Daily Nifty 50 chart
- General Discussion
- There has been an increase in trading range price action on the daily chart, indicating that both bears and bulls will have opportunities to profit.
- Traders who sold at the low of the bear breakout bar from the head and shoulders pattern should consider exiting now, as the market did not provide follow-through after the breakout.
- However, if the market starts to decline again after you exit, re-enter the trade on a bear close.
- Deeper into Price Action
- This week, instead of focusing solely on price action, I would like to dive deeper into trade management.
- Let’s say you sold Nifty 50 at the low of the bear breakout bar from the head and shoulders pattern because the market looked bearish after a strong bear breakout, right?
- Now, if the next bar that forms is a strong bull bar, what should you do? Exit the trade, or continue holding and rely on your stop-loss?
- Neither option is inherently wrong, but from my experience, as traders become more experienced, they tend to prefer managing their trades actively rather than waiting for the stop-loss to be hit.
- So how would I manage this trade? Let’s assume I decide to exit the short position after seeing the bull bar. Two possible scenarios could follow:
- Nifty 50 goes up
- Nifty 50 goes down again
- If the market goes up, you don’t need to do anything. But if it forms a strong bear bar that closes below the low of the bull bar, you should re-enter the trade.
- For some, managing trades might seem like a bad idea because it increases costs and requires more time and attention. But if you crunch the numbers, you’ll find that managing your trades tends to yield better results.
- Patterns
- The market is currently trading near the upper trendline of the wedge bottom, so traders should wait before considering a buy position.
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