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 Tuesday, Banknifty opened above previous day’s range and there was a quick rejection and sellers aggressively took prices below PDL at open itself. But after the initial 30 min aggressive down move, sellers failed to give follow through to the downside. Now what can be interpreted from this is that there are sellers sitting above this sideways range which do not want prices to move further up, so there is a chance of sideways to down move until these sellers do not give up their positions which can be confirmed by acceptance above PDH. Also, After the initial 30 min move, Banknifty remained inside range forming a Normal day which could mean that these time was taken by higher timeframe sellers to absorb the supply . This all theory will become valid if PDH is protected and prices started moving below PDL otherwise this last 3 days sideways move could just be absorption of supply on higher timeframe.
What can be expected now:
Banknifty is expected to remain sideways unless we see a clear acceptance above or below previous day’s range which also overlaps with sideways range. So, price action at PDH and PDL becomes very important. Acceptance above PDH can give a big move to upside and in case of acceptance below PDL, we can go a test virgin POC levels of 34900.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, there is uncharted territory and acceptance above PDH can possibly move prices further upside indicating a breakout. In case prices accepts below PDL, virgin POC (34900) is important.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and there is no clarity at open auction. Only in case prices move to either direction breaking PDH or PDL and no rejection from opposite side, i will plan to take trade in that direction.
- Watch out for price acceptance above PDH. In case of price acceptance and sellers weakness, we might see a good move above PDH in Banknifty.
- No short trade if prices are above PDH. Both indices are at all time high and acceptance above PDH means higher timeframe still want to take prices up.
- No long trades below PDL, Prices below PDL may indicate a start of downswing and going long will be very risky.
- Watch out what Nifty is doing before taking a trade in banknifty for double confirmation.
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.