Cup, Handle… and a Potential Breakout Brewing!
Despite the sideways grind, the underlying structure remains constructive. A strong breakout from the current setup could open the next leg of the uptrend.
Indian equity markets staged another recovery this week, with the Nifty500 up 1.35% and benchmark indices (Nifty50 and Sensex) gaining approx. 1.6% each. Yet, the market can still be said to be moving sideways, with Nifty500 swinging between 20,800 and 22,000 levels since June 2025. Every bullish move so far since June has been met with an equally sharp pullback, a classic tug-of-war between bulls and bears.
But if we zoom out to the weekly chart, a bigger story unfolds. The Nifty500 index seems to be forming the handle portion of a Cup-and-Handle pattern, with volatility tightening, which is a sign of pressure building up before a breakout. When this handle resolves, it could be explosive. This setup often precedes a strong breakout, and if that materializes, it could set the tone for a highly rewarding 2026.
As of 1:15AM, over 80% of the members in our Pro-Setups Discussion group believe that this bullish cup-and-handle pattern is ready for a breakout.
Use Code FESTIVE25 for 25% Discount and 1-month extra on Annual Subscription.Key Drivers This Week
Expectations of a healthy corporate earnings season, particularly with TCS kicking off Q2 results with better-than-expected revenue performance and optimistic guidance for H2FY26 growth prospects, served as one of the key drivers supporting market sentiment. Meanwhile, newly listed Saatvik Green Energy reported over 250% revenue growth, sparking a gap-up opening and becoming the first company to go to the Power Earnings Gap in our Pro-Setups Dashboard.
US-China Trade Escalation: Trump announced an additional 100% tariff on all Chinese imports on October 10, 2025, effective November 1, raising total tariffs to 130%, in response to China’s new export controls on rare earth elements. This escalation could affect Indian equity markets through increased volatility and supply chain disruptions.
Technical Perspective
Nifty500 Trend: Nifty500 rose approx. 1.35% and the benchmark indices (Nifty50 and Sensex) gaining around 1.6% each. However, the market remains stuck in a sideways pattern, with the Nifty500 moving back and forth between 20,800 and 22,000 levels since June 2025.
The reason we track Nifty500 is because it represents over 90% of the free float market capitalization, making it a comprehensive barometer of market health.
Nifty500’s 10EMA crossed above its 20EMA, triggering a ‘Stay’ signal that suggests holding onto existing long positions. This comes after last week’s ‘Curtail’ signal advised reducing exposure. These alternating signals are typical during sideways market phases, which is the current trend we are experiencing.
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Trading & Investment Strategy
The strategy remains same as last week. We are still in a sideways market, and it has been proving more dangerous than a clear bear market. In a sideways market, stock prices bounce up and down within a range without going anywhere meaningful. The current swings that our market is experiencing are wide.
Sideways markets are trickier than bear markets. In a bear market, the direction is clear - everything is falling, so we simply stay away and keep our money safe. But in sideways markets, prices keep giving false signals - they go up a bit, making us think it is time to buy, then they fall back down, making us think that it is time to sell.
This week’s recovery looks more like a rebound than a trend change.
Swing Traders: Market mood is cautious. With the index just at the key moving averages, it’s best to have limited exposure and stay alert.
Positional Traders: Positional traders may want to focus on stocks showing strong relative strength in this tougher market phase.
Summary
The market still remains in a sideways phase with no clear trend. However, if you zoom out, the bigger picture looks better. We seem to be setting up a foundation for a robust 2026. But, until the Nifty500 achieves a decisive breakout above key resistance levels in what appears to be a developing cup and handle pattern, maintaining strict risk management remains important.