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 Wednesday, Banknifty opened above previous day’s range and tested PDH and moved up with OTD up at PDH. Usually this type of moves will give a good move to upside but yesterday the bulls failed to move prices up after open due to which prices fell back inside range. Also, sellers were not able to push prices much below and rest of the day’s move was mostly sideways forming a neutral centre day. Another thing to note is that entire day’s range was above the previous consolidation range which gives some more validation to the breakout Banknifty had on Tuesday. Today, we need to observer for any follow through by bulls to the upside above PDH otherwise there are chances of sideways move due to expiry.
What can be expected now:
We can expect Banknifty to move up and trade facilitation matters. In case we see buyer’s exhaustion, we might see small sharp breaks due to shorter timeframe sellers (Inventory adjustment break), so we need to be cautious and it is a good idea to trail your stop losses in case of favourable move. I have a bullish view above PDH, a sideways view inside previous day’s range and I will look for short trades only if prices are clearly accepted below PDL.
Trade plan for today:
Banknifty is expected to open inside previous day’s range at the upper end and I will be looking for long trade only above PDH. Otherwise, in case prices are accepted inside previous day’s range, I will choose to ignore trades in Banknifty. Also, above PDH, trade facilitation matters as today is expiry.
- Banknifty has broken out of consolidation range to upside and sustained for a day. Acceptance above PDH can further take prices up but we also need to be cautious as today is expiry.
- Do not trade against trend. As a thumb rule, do not look for shorts above PDH and longs below PDL.
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