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 Wednesday, Banknifty opened inside previous day’s range and sellers aggressively pushed the prices below PDL but the prices were rejected below PDL. Also, in spite of rejection below PDL , the responsive buying was not strong enough to push prices above day’s high and after almost testing IB high, prices moved sideways with a downward bias for most of the day and ended near day’s low forming a trend down type of day. Now, as we said in previous post, sellers needs a follow through to downside to confirm their strength as we were at important level yesterday, with this move, the follow through has happened. SO there is a greater chance of sellers to continue dominating.
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 (31250), VWAP (30715) and PDL (30170) are the levels to look out for inside previous day’s range. Below PDL, VPOC at 29820 and 29270 are the levels to watch for and if we get above PDH, we can move back up and test VPOC levels at 31460 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 sideways move due to expiry. 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 sideways due to expiry.
- 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.