Observation from previous day:
On Wednesday, prices opened inside previous day’s range and started moving sideways fopr sometime before breaking IB low (Initial balance) on downside. Though I was bearish on Nifty till prices trade below PDH (see previous day’s analysis – Pre-Market Analysis: Nifty Future – 23nd Sept 2020), I did not got a good entry point as I was waiting for rejection at PDH (previous day’s high) or IB high (Initial Balance), both of which did not happen. Then as expected , prices started moving down with one time-framing and broke PDL forming a trend day on downside. Towards the end, prices halted and moved back inside previous day’s range converting trend day to double distribution trend day. This sideways move was also as per our expectations because of approaching expiry. Now few things to note are: 1. Prices tried to scale back and closed just below the LVN (low volume node) which is exactly at POC (point of control) of the previous day, so that level of 11270 forms an important reference. 2. Prices took support just above an important level of 11000 but it would have been better for Buyers if they tested what is below 11000 before moving prices up, so I do not have much confidence in this late up move which to me looks like option writers trying to keep prices inside range. Today, in case of acceptance above 11170, we can tag previous day’s high which is also poor high, but in case prices are accepted below 11170, we might again attempt to break PDL and test the level of 11000. Having said this, one more factor to consider today is monthly expiry and things will not be smooth because of this.
What can be expected now:
Overall I am bearish on Nifty, so I will avoid any long trades in Nifty. It does not mean Nifty cannot go up but it means that if it does, I am okay to miss that up move. In case, prices are accepted below 11170 levels, I will look for a short trade with an understanding that prices can be volatile today on account of expiry and option writers will try to keep prices in range and at least above 1100 levels today, but we need to see if they are able to manage this expiry.
Trade plan for today:
Nifty is expected to open near PDL and 11000 is am important psychological support. Also, option writers will try to keep Nifty expiring above 11000, so I will not take open auction trade but carefully watch open auction to get clarity. We need to see how committed buyers are to defend 11000 level but if prices start accepting below that, we can fall more and next level to watch for would be 10885 on the downside. If Buyers manage to keep prices inside previous day’s range, we might see a late rally on account of short covering but looking at overall structure, I will only look for short trades today or no trades in case of sideways movement.
- Today is expiry, so expect volatility and movement any side will not be smooth.
- In case of confusion, a better thing to do would be to stay out of trade for today and I have a feeling that this expiry is not going to be smooth one.
Please note that this is a personal view for learning , observational and education purpose and is not a trading recommendation. Trading futures carry a risk, so you should consult a financial expert before taking any risk. Also, Nifty in above statements Indicate Nifty future for current month and not Nifty index.