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, Banknifty opened inside previous day’s range and after an initial struggle between buyers and sellers, prices moved down to break PDL and closed at the low of the day making a NVD down day in Banknifty. One thing that is clear from yesterday’s price action is that there is higher timeframe involved in selling and they want to mark prices down but then this down move is a correction in the daily timeframe uptrend, so we need to see where these higher timeframe sellers will stop. But , till we have clear signs higher timeframe sellers exhaustion or relative strength of Higher timeframe buyers, getting into long trades would be risky. As a common sense, we should never try to trade against people who can move markets.
What can be expected now:
We need to watch where prices are accepted. I will watch for clues of buyer’s strength only if prices start trading above PDH, otherwise long trades would be risky. In case prices start trading below PDL, Sellers would be in control and we can avoid any long trades. Overall, we need to some kind of confirmation on this down move stopping before we plan any longs. I am not very comfortable with shorts now, so I will probably stay out of short trade. PDH (32465), VWAP (32090), PDL (31690) are levels to watch out for price action. Above PDH, VPOC at 32695 and swing high (32860) are the levels and below PDL, VPOC (31440) are the levels to watch for today.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and I would wait to see where prices are getting accepted. Only in case prices start accepting above PDH, I will look for long trade opportunity otherwise I will not take any trades in banknifty today. Also, before taking any trade, i will also check what Nifty is doing and if Banknifty is in sync with Nifty or not.
- Watch out for Nifty. Long trade is good if both the indices are trading above PDH, otherwise in case of any discord, it is little risky, so we can trail tight in case we get into a long trade.
- 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, Bank-nifty in above statements Indicate Bank-nifty future for current month and not Bank-nifty index