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 inside previous day’s range at single prints of previous day and buyers were not able to move prices up. The prices got rejected and moved down forming a NVD down day. Banknifty is a different story than nifty as in Nifty we see some strength of buyers whereas in Banknifty, the buyers strength is not visible. So, we need to be cautious unless both indices get into sync. Today, PDL is very important level in banknifty and we need to see if we accept below PDL or get rejected. Any acceptance above PDL is good for buyers and any acceptance below PDL is good for sellers. Having said this, volatility around PDL cannot be ruled out if buyer and sellers both start the struggle, so we need to trade with caution in both the cases.
What can be expected now:
Banknifty is weaker than Nifty and PDL (32460) level is the level to watch out for and see if prices are accepting above or below PDL, Above PDL is bullish and below PDL is bearish. Also, decisive break of PDL can bring a good down move.
PDH (33175) , HVN (32675) and PDL (32460) are the levels to look out for from previous day’s range. Acceptance below PDL can bring a good down move in Banknifty.
Trade plan for today:
Banknifty is expected to open inside previous day’s range and I will for IB range formation in case prices does not break PDL at open. Only in case prices break PDL decisively, i might look for a short trade but this also can be risky , so I will trail my stop loss tight. Once prices get accepted below PDL, they should not come back inside previous day’s range else we can conclude that things have changed and we need to adjust if we are in short trades. Also, PDL is very important level from higher timeframe perspective also.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL .
- Also, watch out for strength/weakness 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, Banknifty in above statements Indicate Banknifty future for current month and not Banknifty index.