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 Monday, Nifty opened above previous day’s range with a gap up and sellers tried to push prices down in start but they were not even able to test PDL and a buying gap was left. After IB range was formed, market moved more in sideways manner with upward bias. Though prices were accepted above PDH, the buying momentum was not very strong, so I am not very confident on this upmove and we might see a possible bigger inventory adjustment break in coming days. But nothing is certain, so until prices are accepted above PDH, I have a long opinion and will not enter shorts until we have a clear rejection. There is also a possibility of prices moving in this sluggish pattern.
What can be expected now:
We need to see if trade facilitation by buyers. Continuous acceptance above PDH is good for bulls but we need to be cautious on the long side as well. Unless there is a clear rejection from the highs, we should not look for short trades. This is the time where everyone is more or less confused because Market is not correcting as well as momentum to upside is not very strong if you look at Intraday. On higher timeframe, we are clearly in upswing.
Trade plan for today:
Nifty is expected to open with a gap up above PDH and we need to see if prices are accepted above PDH. I will look for a long trade only if there is an OTD up at PDH and will ignore any trades in case of a gap. Also, I am not expecting a huge upside today, so we need to look at trade facilitation also in case of price acceptance above PDH. In case prices failed to trade above PDH for a longer time, I might look for a short trade but only after some price action confirmation.
- As indicated, trade facilitation by the bulls is very important. For sellers, it is good if we see a clear rejection at the highs.
- 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.
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.