Pre-Market Analysis: Nifty Future – 22nd Oct 2020

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Observation from previous day:

On Tuesday, Nifty opened above previous day’s range and tested PDH to get rejected and moved up with OTD up (open test drive up). Usually, such moves at open should give good upside movement but Nifty saw exhaustion near weak high, which was also the top of the consolidation range. From there, sellers pitched in aggressively and took nifty much below PDL (previous day’s low) but in the end , prices recovered to close near PDH (previous day’s high) forming a Neutral centre day. Now, this down move can be treated as Inventory Adjustment Break for throwing out short term buyers but we need to see follow through on upside and price breaking above PDH for confirmation.

What can be expected now:

After yesterday’s Inventory adjustment break, we are poised for a good move on upside but that can happen today or tomorrow as today is also expiry. Also, we should not be coming back near PDL (previous day’s low) otherwise the logic will fail. Any break above PDH (previous day’s high) should give a good move on upside.

Trade plan for today:

I am expecting Nifty to open inside previous day’s range but near PDH and we can see good movement on upside if prices get accepted above PDH (previous day’s high). But today is also weekly expiry, so we need to be cautious at open and wait for signs of sellers exhaustion to get into a long trade. Only in case prices break PDH at open, I will be looking for a long trade near open today, otherwise I will wait for sometime to observe what Nifty is trying to do.

Some cautions:

  1. Both Nifty and Banknifty has to break above PDH (previous day’s high) for a good upside move).
  2. Today is weekly expiry, so a sideways move is in best interest of option writers.
  3. Strictly, no short trade if prices are accepted above PDH (Previous day’s high).

Disclaimer:

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.

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