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 Monday, Banknifty opened inside previous day’s range but at the lower distribution curve and sellers pushed the prices below PDL from the start giving us the expected follow through to downside. After a big range IB formation, prices broke IB low to downside but then sellers struggled to take prices further down and we got a up move of prices in the last hours as result of sellers exhaustion. Whether this up move was due to higher timeframe buyers or was it just and inventory adjustment break by sellers need to be seen today and what we need to observe is whether we get a follow through of this up move today or not.
What can be expected now:
I have a bearish outlook if prices trade below 35835 levels and will turn bullish only if prices are accepted above this level. Also, in case sellers want to take prices down, they should test and break PDL today otherwise more sideways movement without breaking PDL will look like sellers exhaustion and a chance of potential short covering will open up in that case.
PDH (35545) and PDL (34455) are the levels to look out for from previous day’s range. Above PDH, we can test Trend day VWAP levels of 35835 where price action will decide if market is in control of sellers or not. In case prices move below PDL, there is no nearby support and we can see a big fall in Banknifty.
Trade plan for today:
Banknifty is expected to open inside previous day’s range near PDH and there is no clarity at open auction. I am bearish till prices trade below 35835 levels but as banknifty is expected to be volatile, I will probably wait for IB range formation and then decide on a trade later in banknifty.
- Long trades are risky if prices trade below 35835 levels.
- No long trade if prices trade below PDL and no short trade if prices trade above 35835 levels.
- Watchout for Nifty also and see if both indices are showing similar signs for direction confirmation.
- In case of higher volatility in banknifty, its best to ignore Banknifty.
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.