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 Friday, Nifty opened above previous day’s range with a big gap but there was no signs of follow through on upside by the buyers. There was a one time framing down from the start but since prices was trading above PDH, there was always a big risk on taking a short trade unless prices came back inside previous day’s range and after no rejection at PDH, the fall accentuated forming a trend down day which is also bearish engulfing on daily charts. Sellers dominated entire Friday.
What can be expected now:
Today we need to see if sellers are able to push prices further below PDL to give a follow through to downside or not. So, price action at PDL is very critical. In case sellers are not able to test PDL or in case they get rejected below PDL and move back inside range, we can look for sellers exhaustion and buyers dominating but in case prices are clearly accepted below PDL, we can expect further downside move.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, we can test poor high and below PDL we can test PDL but price acceptance below PDL for a longer time means buyers are not interested and that can lead to another big fall. But until prices trades decisively below PDL, the sellers cannot be said to be in control and shorts above PDl would be risky.
Trade plan for today:
Nifty is expected to open inside previous day’s range near 15100 and there is no clarity at open auction. PDL is very crucial today and in case prices test that level, rejection or acceptance below PDL will decide the direction of my trade. VWAP levels of 15155 are important inside previous day’s range and in case prices trade convincingly above that level, I might look for a long trade later.
- Watch out for price acceptance above VWAP. there is a possibility that prices might not test PDL in case buyers dominate today.
- Test of PDL will be first indication that sellers are dominating but there are good chances to prices getting rejected in first attempt below PDL, so price action at PDL is crucial.
- No long trades 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.