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 Friday, Banknifty opened below PDL with a hige gap down and tested the swing low at the open itself but after this big gap down open, sellers were not able to puch prices further down and Banknifty moved back inside previous day’s range. After IB range, the prices moved sideways. This entire price action shows that there are higher timeframe buyers buying all dips in Banknifty, so until these buyers are there, there is likely hood of this sideways move continuing. The PDL now becomes very important as we have tested that level multiple time and buyers are likely to give up if prices start accepting below that level, so we need to watch out for that today.
What can be expected now:
Banknifty is weaker than Nifty and PDL 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 but once prices accept below PDL, they should not come back inside previous day’s range.
PDH and PDL 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 below previous day’s range and in case there is a gap down open, prices will be very volatile and not easy to trade at open. So, I will for IB range formation in case of gap down open. Once prices get accepted below PDL, they should not come back inside previous day’s range else we can assume continuing struggle between buyers and sellers which is not good for directional trades. So, in that case, we can ignore further trades.
- 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.