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, Banknifty opened above PDH and tested PDH. The buyers then took prices up but after IB range formation, the prices got rejected above IB high and then responsive selling pushed the prices back into previous day’s range to test IB low only to get rejected by buyers again. The Banknifty ended up forming a non-trend day with the value area shifting on upside. This shows that still there is a struggle going on in Banknifty and though buyers have moved the prices up, the sellers are not giving up. So, we need to observer which side wins. In case buyers win, we can expect a good move on upside partly owning to short covering but in case sellers win, we can expect prices to move down from here and break the swing low in the coming days. Also, Nifty is showing strength, so in case Nifty continues to show strength, we need to be cautious with any short trades in Banknifty.
What can be expected now:
Today also, we need to watch price action with reference to previous day’s level and then form a directional view based on strength/weakness of buyers or sellers. In case of price acceptance above PDH, buyers will be in greater control but in case of acceptance below PDL, sellers will have an advantage over buyers. In case prices continue sideways movement inside previous day’s range or if there are rejections at range extremes ,we can assume there is unfinished business in short term and prices will probably not show any good directional move. In that case , we need to be cautious above our trade or may be we can ignore the trades till prices settle down.
PDH (34180) and PDL (33690) are the levels to look out for from previous day’s range. Above POC, we can test poor high levels of 34420 and below PDL , there is virgin POC levels of 33575 and 32960 which can be tested. Acceptance below PDL will not be good for buyers but we need to watch carefully if nifty is also showing weakness in that case else strength in nifty can pull up Banknifty.
Trade plan for today:
Banknifty is expected to above previous day’s range and there is a no clarity at open auction. I will wait for IB range formation and then take a trade according to the levels where IB range is formed. I am positively biased if prices is accepted above PDH and negative if prices are accepted below PDL but I will look for a trade probably after IB range formation.
- Short trades are risky if prices trade above PDH.
- No long trade if prices trade below PDL.
- In case of sideways more, we can ignore any trades for today.
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.