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, HVN (High volume node
Observation from previous day:
On Monday, Banknifty opened inside previous day’s range and sellers aggressively pushed the prices below PDL but the prices were rejected below PDL. Also, inspite of rejection below PDL , the responsive buying was not strong enough to push prices above day’s high and after testing IB high, prices moved sideways with a downward bias for most of the day and ended near day’s low forming a non-trend type of day. Now this day can be seen as sellers exhaustion or sellers absorbing all demand which have two opposite meanings, but in second case of sellers absorbing all demand, we need to get confirmation with a follow through to the downside.
What can be expected now:
We need to watch if prices are getting accepted or rejected below PDL. In case Banknifty continues to get accepted below PDL, we can see lower levels in coming days but any rejection of down move in Banknifty might trap the laggard sellers. But as long as any confirmation happens for rejection, its better not to take any aggressive longs.
PDH (31700), POC (31465) and PDL (30985) are the levels to look out for inside previous day’s range. Below PDL, VPOC at 30800 is the level to watch for and above PDH, we can move back up and test VPOC levels at 32750 in coming days.
Trade plan for today:
Banknifty is expected to open below PDL and I do not have any clarity at open auction. I will wait and see price behaviour at PDL to observe if prices are getting rejected inside previous day’s range or getting accepted. In case sellers want to push prices down further, Banknifty should not get accepted back inside range but in case it does, then there is a good chance of short covering and sideways to bullish move. Otherwise, if Banknifty continues acceptance below PDL, I will look only for short trades.
- Watch out for trade facilitation below PDL. In case of seller’s exhaustion, there is a chance of prices getting rejection and moving up.
- No longs below PDL and no shorts above PDH. In fact, i will not be looking for any short above PDL .
- Nifty is weaker than Banknifty, so look out for clues from Nifty in case you want to take a trade in Banknifty.
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, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.