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, Nifty opened above previous day’s range with a gap up and buyers tried to push prices up in start. After IB range was formed, sellers tried to take prices back inside previous day’s range but failed and after that 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 ws a likelyhood of prices testing the swing highs (poor and weak high levels) again. Now, we need to see how is price facilitation above Nifty tests above the swing high today.
What can be expected now:
We need to see if Trade facilitation by buyers after prices move above swing high levels. Usually the sharp break on Monday is inventory adjustment break to throw out weak buyers and if that is the case, we should not see selling pressure once Nifty crosses swing high. But in case of Buyer’s struggle again and poor trade facilitation, we need to be cautious on the long side.
Trade plan for today:
Nifty is expected to open with a gap up above PDH looking at the SGX and again the christmas euphoria in the markets. Now, these big gaos are difficult for intraday trades as it is difficult to judge if price is getting accepted or rejected at the open. So, In case of Gap, I will stay out of open auction trade as there is not much clarity. I will bullish on nifty 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 Nifty 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, Nifty in above statements Indicate Nifty future for current month and not Nifty index.