Abbreviations I use in the post: PDH: Previous day’s high, PDL: Previous day’s low, IB: Initial Balance or First 1 hour range, NVD: Normal variation day (one of the market profile day types), OTD: open test drive, POC: Point of control
Observation from previous day:
On Tuesday, Nifty opened with a huge gap up above previous day’s range and at a new all time high. Sellers aggressively tried to push nifty back inside previous day’s range but failed again. This is a common thing from few d ay that Nifty opens gap up and sellers become aggressive but fail to give a meaningful follow through to downside. This indicates that sellers are weak or from smaller timeframe and larger timeframe is absorbing all supply and moving the value area upside. we have been indication from last few days not to short above PDH and that simple advise would have saved us a lot of losing trades on short side.
What can be expected now:
Nifty is constantly moving upside with value area also shifting upside. There is no point looking for a short trade until we keep moving upside. I would have been very comfortable with a long trade if some meaningful retracement would have happened but anything can happen. So, I will be cautious and look for long trades only till prices are accepted above the high of last week days consolidation (11765 levels). Only in case prices comfortable trade below 11765, I will look for any short else not.
Trade plan for today:
Nifty is expected to open near PDH and I will take a long trade in case of OTD up at PDH or if prices break PDH decisively. Otherwise, I will wait for IB range formation and then look for long trade either at rejection of lower levels or breakout of higher levels. I am not keen on a short trade until prices trade comfortable above 11765 levels.
- No short trades if prices are accepted above 11765 levels. IN case there is a buyers exhaustion, we will see some more signs for some days and I do not see any such signs now.
- Anytime, you think you are not comfortable taking trades (which is usually the case with new highs), we can stay out always and that would be the best trade. Market is not running anywhere.
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