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, Nifty opened below previous day’s range with a gap down and buyers were unable to even test PDL and gap sustained. As we talked about in previous post, if sellers show a follow through to down side, there is no point looking for a long trade, and after the buyers failed to even fill the down gap at open, sellers took the prices down forming one more down trend day. Now we have fourth day of down move and momentum looks strong on the downside. Also on daily charts, we have broken below previous swing low, so the uptrend for now has stalled. For this uptrend to resume, we need to cross the swing high on daily charts otherwise we may see a sideways or a larger down move in coming days.
What can be expected now:
We can expect the down move to continue but now this is very obvious to everyone, so there is a volatility expected. Also, second reason for expecting big swings is upcoming even of Budget in which traders would try to take positions or take out profits. So, we can either stay out of trade or trade with caution. Till prices keep accepting continuously below previous day’s range, we can look for short trade.
PDH (14205), HVN (13980) and PDL (13930) are the levels to look out for inside previous day’s range. Below PDL, VPOC at 13855 and 13725 are the levels to watch out for. is the level to watch for and above PDH, we can first look for gap above PDH.
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 sideways move due to expiry. 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 sideways due to expiry.
- No longs below PDL. Do not try to catch a falling knife.
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.