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 Friday, Nifty opened inside previous day’s range and buyers failed to take prices up above POC. Sellers aggressively marked prices down and though there was a support at PDL as expected, the buying was not able to protect PDL and sellers broke PDL and prices ended below PDL making it a NVD down day. Now, this was not what I expected but this looks like after so many days, sellers seems to be strong. IT would have been better if we have clear rejection on upside and prices always have a good chance to test poor highs. But anything can happen in markets, so we need to watch out for any follow through on downside to judge if this selling was coming from higher time frame sellers or not.
What can be expected now:
We need to watch whether prices are accepted above of below PDL and price behaviour at PDL. In case sellers are above to break PDL and give follow through to downside, there is no point looking for a long trade and we can start looking for a short trade but in case price fail to trade below PDL and in case there is a failed auction below PDL, prices might again start moving upwards as the Friday’s selling can be again assumed to be from smaller timeframe in that case.
Trade plan for today:
Nifty is expected to open below previous day’s range and I would wait to see price action at PDL. In case prices stay below PDL, I will look for short opportunity but in case prices move back inside previous day’s range, I will look for long opportunity. Also, before taking any trade, i will also check what Banknifty is doing and if it is in sync with Nifty or not.
- No longs below PDL and no shorts above PDL. In fact, i will not be looking for any short above PDL .
- Keep an eye on Banknifty and see if it is in sync with Nifty or not. For example, if nifty is rejected below PDL but Banknifty is accepted below PDL, its better to avoid trade or trade small.
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.