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, Nifty opened just below PDH and there was a struggle between buyers and sellers at PDH. After IB range formation, buyers took prices above IB high which looked like upside breakout but the trade facilitation became poor on the upside. Taking advantage of poor trade facilitation by buyers, sellers pushed the prices aggressively down in the end below IB low and back inside previous day’s range. Now we need to see that this down move was inventory adjustment break from lower timeframe sellers or from higher timeframe sellers. In case this IAB was from lower timeframe, we can expect the prices to scale back up today and at least test POC again but in case of IAB from higher timeframe, prices can move further down. About reversal on higher timeframe, we cannot in anyway confirm it for now and this needs to be understood.
What can be expected now:
as indicated above , we need to see if prices are getting accepted below PDL or getting rejected below PDL. IN case of acceptance, we can likely move more on downside but in case of rejection below PDL, we can go back to test PDH and then this inventory adjustment break will be confirmed from smaller timeframe and we need to monitor buyer’s strength after that.
PDH (15265) , POC (15210) and PDL (15060) are the levels to look out for from previous day’s range. Above PDH, there is uncharted territory and acceptance above PDH is good for bulls. Below PDL , we can look for gap filling first at 15008 levels and in case of acceptance below it, we can go down to test virgin POC at 14950 and poor low at 14870.
Trade plan for today:
Nifty is expected to open inside previous day’s range and there is no clarity at open auction. but in case Nifty gets accepted inside previous day’s range for longer time and does not break below PDL, there is no point looking for short trade and I will look for long trade opportunity but remember, price action and trade facilitation matters to decide if there is a trade or not. There is no point going long if prices are accepted below PDL and therefore I will look for a short trade in case that happens.
- Watch out for price rejection below PDL . In case of seller’s exhaustion below PDL or even inside previous day’s range, there is a chance of buyers pitching in an taking prices higher to test PDH.
- No short trade if prices are accepted above PDL. and no long trades if prices are accepted below 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.