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 Wednesday, Nifty opened above previous day’s range with a good gap up but buyers were not able to follow through on upside and showed exhaustion. The sellers took advantage of that and pushed the prices back inside previous day’s range. I was expecting buyers to defend and keep prices above previous day’s range, but it seems sellers were very aggressive and the prices fell sharply forming a big triple distribution trend day on the downside. These days are not usual and this gives us a significant warning. Also, Nifty has formed a bearish engulfing pattern on daily charts which is not good for buyers. So, prices are expected to be volatile and we might start a bigger retracement in case prices are accepted below PDL today.
What can be expected now:
Wednesday was a triple distribution down trend day with POC overlapping with POC of Tuesday forming a prominent point of control at 13025 levels. So, this level become very critical today and in day’s to come. Only if buyers are able to take prices and sustain above 13025, we can ignore this big selling move otherwise we might move further down. Break of PDL and acceptance below it can take prices to test poor low near 12750 levels and below it prices can also tag virgin POC at 12720 levels. Today is expiry, so there is a chance that we might trade sideways inside previous day’s range between 13025 and PDL, and in that case we can see a follow through to downside on Friday.
Trade plan for today:
Nifty is expected to open inside previous day’s range just above POC and we need to see whether prices are getting accepted or rejected below PDL. In case of decisive break of PDL, I will look for a short trade. IN case prices are accepted inside previous day’s range, another short trade can be at rejection of 12990-13025 levels but considering today is expiry, we can expect prices to move mostly sideways in case they are not able to break PDL. If in case, prices are accepted above 13025, I will not look for any short trade and this would mean yesterday’s down move was just another short timeframe inventory adjustment break (this is less likely but anything can happen in markets).
- We have formed a bearish engulfing on daily charts , so any follow through below PDL by sellers can bring more selling.
- No short trades above 13025 levels and no long trades below PDL. I will also avoid any long trades above 13025 and am okay to miss an up move.
- Today is expiry, so things can be volatile in beginning and towards the end. Only in case prices move sideways inside previous day’s range, we can assume option writers to keep nifty in sideways zone.
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.