I have created an Update Status Activity Notification for the out of the box 'Cancelled' status but it is not working, the notification is not sent.
The steps are the correct ones as same steps are working for other statuses :
Administration Tab - Notifications - Activity Notifications - Update Status
and in the out of the box Notification Rule, select i.e. a Contact to be notified.
While notification is being sent when incident is updated with other statuses, when updated with 'Cancelled' status, the notification is not sent.
When the status is set to 'Cancelled', the activity triggered is the activity type 'Close', not the activity type 'Update Status', so any notification associated to the 'Update Status' activity will not be sent.
You can verify this in the Activities Log Tab.
The 'Close' activity is triggered for the 'Cancelled' status because out of the box the 'Cancelled' status has the checkbox 'Make Active?' NOT checked, and the checkbox 'Make Resolved?' not checked.
If you CHECK 'Make Active?' for the 'Cancelled' status, then the ticket will remain active and the 'Update Status' activity type and its associated notifications will be triggered when the ticket is updated with the status 'Cancelled'.
Please , also see document TEC585523