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 Tuesday, Nifty opened above previous day’s range with a gap up and after some sideways move confirming buyer’s exhaustion, sellers tried to push prices back inside range but sellers failed to do so and prices moved sideways thereafter. This is expected behaviour until we have a clear rejection and this means that smart sellers are from shorter timeframe. On higher timeframe, we are continuing uptrend but the momentum on Intraday is not strong. In case exhaustion continues, we might see a bigger inventory adjustment break.
What can be expected now:
There is not much clarity now. Until we have a strong rejection indicating entry of higher timeframe sellers, we might continue this upmove and this would be difficult for intraday traders as it seems there is a missing participation by all buyers.
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.