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 inside previous day’s range near PDL and after an initial struggle, sellers took prices below PDL and filled the gap as expected. But thereafter, the follow through to the downside as missing and prices kept hopping in the out of previous day’s range at PDL. This means that still, there is a struggle going on and hence no clarity for now. Also, this price action from last few days have started to look like distribution but for this to confirm , we need to see prices moving further down in coming days. Also, remember that this distribution and down move in smaller timeframe can be just a inventory adjustment break on higher timeframe also known as pullback.
What can be expected now:
We need to see if sellers are able to follow through to downside today or not. In case prices are accepted below PDL, we can see a good down move but in case prices get rejected below PDL, we can see buyer’s pitching in and prices moving sideways to upside throughout the day. In case of rejection below PDL, this would just mean that sellers are not yet ready to take prices down and in case smart money is distributing, the distribution is pending.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, we can test swing high and below PDL , 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 but near PDL and open auction can be volatile. But, we need to see if prices are getting accepted or rejected below PDL to plan out trade. In case prices struggle to break PDL decisively, we can look for a long trade opportunity later after sellers are exhausted. Also, today is expiry, so we cannot rule out a range bound day but looking at the past few days sideways move, we need to be cautious and should not take trades opposite to trend if market starts trending today.
- 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.
- Today is weekly expiry, so just be cautious about option buying.
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.