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 inside previous day’s range near VWAP and though it was a balanced open sellers pushed the prices below PDL. Now PDL was am important support and we have last 3 days lows clustered in the area, so there was a big fall as soon as that area broke. After Initial IB range which was very big, the prices moved mostly sideways with upper bias inside IB range and came back to close at the same area from where it broke down. This was a Normal day type and the area where prices closed is important. In case prices start accepting above the close (14700), we can say that yesterday’s down move was also because of short term sellers (which does not look like the case for now). Until prices accept above the close, the sellers are in control and we can expect another down move.
What can be expected now:
There was a big down move yesterday for the first 1 hour and then down move halted. So, we are not sure whether the sellers causing the down move have covered up their shorts or not (or in other words, we are not sure which timeframe these sellers belong to). This is what we need to observer today. In case sellers were from short timeframe, the prices should continue to move up from where it closed yesterday but in case that does not happen and price trade back below 14700, we can assume that sellers might be from higher timeframe but we will get this confirmation only once prices breaks the PDL. Now, Since yesterday’s raneg was big, there is a possibility of sideways move inside previous day’s range today but where that happens, above or below closing level (14700 level) matters.
PDH (14900) , POC (14590) and PDL (14490) are the levels to look out for from previous day’s range. Other very important level is close 14700 which is also volume POC or HVN. . Above PDH, we can test poor high at 14973 and below PDL, we can test virgin POC at 14405 and then go to swing low at 14260.
Trade plan for today:
Nifty is expected to open inside previous day’s range near 14700 and these is no clarity at open auction. In case prices stay above 14700 decisively, I might look for a long trade but I will ignore any long trade if prices struggle to go above 14700. Also, short trade will not be very convincing unless we start accepting below 14590 and PDL. Compared to Nifty, Banknifty is weaker, so in case of shorts, we can also look for shorts in bank nifty if prices break PDL there but need to be cautious as Banknifty is more volatile than nifty.
- No short trades if prices trade above 14700 levels. Even short trades above POC (14590) are risky.
- No long trade if prices trade below PDL.
- Watch out for strength or weakness in Banknifty. In case Banknifty breaks down below PDL, ignore long trades in Nifty.
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.