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, Nifty opened inside previous day’s range near to POC and sellers aggressively pushed the prices below PDL. Though there was some buying below PDL, it was not enough to test even the day’s high and prices moved sideways for most part of the day and at the end, sellers pushed the prices down again to break IB low and close near to the low of the day. This was the third down move day due to aggressive sellers. One thing however is to note that there is no clear one time-framing down on any of these down days which suggests that there is a buying activity going on. So, though still we can say that this move is a retracement on uptrend and we need to see which level buyers support the prices or if they are even able to provide support and counter these aggressive sellers or not. Needless to say, if price keep accepting below previous day’s low, the down move can continue and there is no point going long.
What can be expected now:
We need to watch is prices are getting accepted or rejected below PDL. As of now we are back into the levels from where Nifty after absorbing all the supply before it moved up, so these levels are critical. In case Nifty continues to get accepted below PDL, we can see lower levels in coming days but any rejection of down move in Nifty might trap the laggard sellers. But as long as any confirmation happens for rejection, its better not to take any aggressive longs.
PDH (14500), POC (14365) and PDL (14230) are the levels to look out for inside previous day’s range. Below PDL, weak low at 14078 is the level to watch for and above PDH, we can move back up and test the HVN (14270) and then VPOC levels at 14730.
Trade plan for today:
NIfty 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, Nifty 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 nifty 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 .
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.