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 near PDH but inside previous day’s range and buyers tried to take the prices above PDH but there there was a lot of volatility above PDH and prices ended up moving sideways with an upper bias forming a NVD up day. This struggles shows that many higher timeframes (both on buy side and on sell side) are now involved, so there is a growing uncertainty on the direction and until that resolves, we might see similar volatility. In spite of all this, the prices are drifting higher as evident from the value area shifting upwards, so there is a good chance of prices moving higher but a quick inventory adjustment break to throw out the weak buyers cannot be ruled out looking at the struggle.
What can be expected now:
Till, we have clarity on the direction now, again the same rule from yesterday. 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 down move. 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 virgin POC at 15005 and poor high levels (15080) on upside. There can be also be sideways move in case there is a rejection above PDH and price action at PDL becomes important in that case. Acceptance below PDL can take prices further down and test the poor low at 14600 levels.
Trade plan for today:
Nifty is expected to inside previous day’s range and there is not much clarity at open. Since, i am bullish if prices trades above PDL levels, I would be looking for a rejection below PDL to opt for a long trade but then we need to be careful with our position size because of the volatility as seen in last few days. Only in case prices break PDL decisively and does not trade back inside range, i will give up my long trade views and probably look for a shorting opportunity but shorting is risky in this market.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL.
- Observe Banknifty also. Banknifty is weak and moving sideways from last three days at lower end. So, in case of any breakdown in Banknifty, it will 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.