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, NIfty opened near PDH but inside previous day’s range and there was a failed attempt by buyers to take prices above PDH which failed in start and Nifty started moving sideways with a downward bias breaking IB low and forming a NVD day on downside. But this all price action happened above Friday’s VWAP level (as discussed in yesterday’s post), so on higher timeframe, still the upmove which was rejection from lows on Friday is valid and bulls still have control. As of now, this sideways move can be seen as consolidation or Absorption of supply and we will have confirmation only if prices break above PDH and gets accepted these. But anything can happen in markets, so this view does not hold good if we start accepting below PDL.
What can be expected now:
Today, we need to observe if prices are getting accepted above PDH or are getting rejected. Acceptance above PDH would mean a bullish move, rejection above PDH can be one more day of sideways move and acceptance below PDL can see a downmove. Therefore, I am bullish on Nifty till it trades above PDL and will give up my bullish views in case prices break PDL.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, we can continue upside and test weak high and poor high levels on upside. There can be also be sideways move in case there is a rejection abvoe PDH and price action at PDL becomes important in that case. Acceptance below PDL can take prices further down and test the swing lows and in that case, bulls are no longer in control.
Trade plan for today:
Nifty is expected to open above PDH and I will opt for a long trade in case prices show OTD up at PDH. In case of a gap up, i will wait for IB range formation and then take a trade accordingly. Also, I will be looking for only long trade till prices trade above PDL and will look for short trade only if prices get accepted below PDL.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL.
- Observe Banknifty also. Banknifty is weak and formed an inside day at lower end. Nifty can see a good movement upside only if Banknifty supports it otherwise Banknifty can also drag NIfty down.
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.