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 Thursday, Banknifty opened above previous day’s range with a gap up and buyers pushed to push prices up in start. After IB range was formed, prices moved mostly sideways with upper bias forming a NVD up. As indicated in last week post before the big Monday fall, as there was not good rejection at highs, there was a likelyhood of prices testing the poor and weak high levels) again. One wek high is tested and another weak high above PDH is now important and can be tested. Also, we need to see how is price facilitation above those levels.
What can be expected now:
I am expecting banknifty to move up and test the poor and weak highs above the PDH level. ONe thing to note is Banknifty has been weaked than nifty and it needs to show relative strength for prices to move up as a whole like it did on Thursday. In case of a poor trade facilitation by buyers , Banknifty can drag down Nifty also and since Nifty is at crucial levels, the price action becomes important at these levels now.
Trade plan for today:
Banknifty is expected to open with a gap up above PDH and likely to test weak highs above PDH at open itself. After that, we need to watch out for trade facilitation. I will bullish on Banknifty above PDH but I will opt for a long trade only in case prices gets clearly rejected at PDH and stays above PDH. I will have a sideways to bearish view in Bankifty if prices trade back inside previous day’s range.
- As indicated, trade facilitation at the highs is important as we need to see if last inventory adjustment break threw out short timeframe sellers or not.
- As we approach year end, volumes can dry up due to holidays.
- Both indices – Banknifty and NIfty need to show similar signs for a good trade. In case of discord, better to stay out.
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, Bank-nifty in above statements Indicate Bank-nifty future for current month and not Bank-nifty index