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 huge gap up. After the open there was a buyer’s exhaustion and sellers tried to take advantage of it to move prices back into range but they were not able to test even PDH and a gap was left between last two day’s profile which is buyer’s gap. The prices moved sideways for the entire day and as explained in the previous day’s post also, there is not much clarity and both longs and shorts are getting risky now a days. Sellers are not able to move prices down much and buyer’s are only responsively buying at lower levels and not moving the prices up especially on intraday basis which indicates lack of conviction.
What can be expected now:
Any acceptance above PDH would be good for bulls but we need to be careful about the trade facilitation on the upside. In case we enter a long trade, it would be good idea to keep a tight watch and trail stop loss whenever possible. Rejection above PDH is not good for buyers but looking at the last few days, the sellers are also from shorter timeframe, so it becomes difficult to trade on short side. So, better to be cautious and trail tight in case of short trade also.
Trade plan for today:
Nifty is expected to open above previous day’s range and I do not have any clarity at open auction, so, I will wait and watch to see if prices are getting accepted or rejected above PDH and later see how is the trade facilitation. On in case of certain clarity and a good entry, I would be opting for a trade today otherwise I will just watch and stay out.
- Watch out for trade facilitation above PDH. In case of buyer’s exhaustion, there is always a chance of sharp breakdown.
- No longs below PDL and no shorts above PDH. Also, in case of no proper entry, 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.