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 Friday, Nifty opened above previous day’s range and sellers tried to take prices back inside range but buyers pitched in every time sellers tried. Interesting thing to note is that Buyers were also not able to give a follow through after breaking IB high on upside and prices settled above PDH but inside a narrow range forming a non-trend day. This indicates seller exhaustion on lower timeframe and buyers exhaustion on higher timeframe. Usually, smart money tries to distribute in these cases and lower prices should happen after a clear rejection once there is no more business to be conducted at these levels. But, in case prices move up and are accepted above 13150 (with a good trade facilitation and not with buyers exhaustion), this view will be negated and we can continue moving upwards.
What can be expected now:
We can see another sideways consolidation unless we break above 13150 decisively and see a good rejection from those levels. There is no point going short until we see a clear rejection or until prices are accepted break PDL decisively. Again, long trades are also getting riskier as indicated earlier also but prices can slowly drift upwards with poor trade facilitation also and in that case, it will be difficult to trade. A good long trade opportunity will be there only in case of a decisive breakout.
Trade plan for today:
Nifty is expected to open inside previous day’s range and there is no clarity at open auction. I will wait for IB range formation or in case prices test 13150 levels, price action at that levels is important. Even after IB range formation, I will look for a good mean reversion trade opportunity at extremes (clear rejection) but in case of no good opportunity, i will prefer to stay out of markets.
- Until we break above the poor high decisively or get rejected from that level decisively, nothing is much clear.
- Sometimes , its better to stay out of market and observe what market is trying to do. Today can be one such day.
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.