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 Thursday, Nifty opened inside previous day’s range and buyers immediately took price above PDH after which buyers lost the momentum which resuled in consolidation. Now , in these case whether it is buyers exhaustion or buyers absorbing supply is not very clear until we get a directional move. After some sideways move, the responsive selling brought prices back inside previous day’s range to test PDH and IB low at later point of day and forming a non-trend day. Now, this sideways movement forming a non-trend day can also be accredited to weekly expiry, so it becomes important to see in which direction prices move today.
We need to see in which direction prices are moving today. Today in fact is simple, prices accepting below PDL is bearish, above PDH is bullish and inside previous day’s range is confusing (so no directional trade). In case we accept below PDL, this would mean the last three days rall was due to smaller timeframe buyers and from higher timeframe , it can be seen a a retrecement in downswing and then we can expect lower prices in coming days. Similarly, prices accepting above PDH is bullish and we can go higher.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, we can test poor low levels and below PDL , we cantest weak low which was the low of Wednesday.
Trade plan for today:
Nifty is expected to open inside previous day’s range near PDL and we need to see if prices are breaking PDL at open. Ony in case prices break PDL decisively, I will opt for a short trade otherwise no trade at open auction. Also, I will probable not take any short trade if prices start accepting above PDL or get rejected below PDL, but in case of prices accepting below PDL, i will not look for any long trades.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL.
- Banknifty is weaker than NIfty again, so in case prices trade below PDL in Banknifty, we can expect Nifty also to be in grip of sellers otherwise not.
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.