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 but near PDL and after spending 45 minutes in start near PDL, it broke PDL on downside. The sellers further broke IB Low on downside but after that it consolidated in sideways range for most part of the day except the last 45 minutes where sellers again took prices down to close at bottom of the day forming a NVD down day. This sideways move was some king of short timeframe accumulation with a later down move a test or was this sideways movement absorption of demand? We need to observer price action today expecially below PDL to get confirmation. Abosorption of demand would be indicated by follow through by sellers on downside below PDL.
What can be expected now:
Nifty has closed at an important reference now , so PDL becomes very important reference today. There was a selling rejection below PDL levels previously, so it is expected that buyers will try to reject prices below PDL again but in case of any acceptance below PDL would mean absence of buyers and then we can see prices moving further down to test swing low. A rejection below PDL is good for buyers and acceptance above POC might see upwards movement in prices.
PDH , POC and PDL are the levels to look out for from previous day’s range. PDL of all is most crucial and we can plan for short trade only on clear acceptance below PDL otherwise not. Below PDL, swing low is the next reference but if we test swing low, we would be probably going lower than that today or in coming days.
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 once prices move below PDL, they should not come back inside previous day’s range otherwise short trades would be in trouble.
- 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.
- Today is expiry, so in case of no clear direction, probability of sideways move is high.
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.