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, Nifty opened inside previous day’s range near PDL and sellers tried to break bewlo PDL in the start and failed. The responsive buyers took the prices up but after IB range, they were unable to break above IB High and then prices moved sideways throughout the day forming another non-trend day and value area shifted downwards. The entire price action has been sideways for past few days which means there are big buyers and sellers both present in the markets as of now and prices will only move directionally once any one of them gives up. That is what we need to monitor everyday and we do not have any clarity yet except for one observation – Banknifty is very weak and showing buildup at lower end of sideways range (ready for breakdown) and Nifty is also moving down forming a lower high and lower low on daily charts.
What can be expected now:
We will not have directional clarity until we move beyond this larget sideways range. All dips are being bought by buyers as of now. But this is usually what happens in a downmove, that is why shorting is never easy and even for big players, they need high conviction and heavy money to move markets down. Prices accepting below PDL is not good for buyers and prices accepting above PDL is not good for sellers.
PDH and PDL are the levels to look out for from previous day’s range. Above PDH, we can test poor high levels and below PDL , we can test weak low from Wednesday and below that we can go to test swing low.
Trade plan for today:
Nifty is expected to open below PDL and we can expect some volatility at open due to weekend position being covered. So, In case of a big gap, we can avoid open auction trades till volatility subsides. Below PDL, we can look for a short trade but in case you are in short, be cautious about any exhaustion of sellers (sideways movement) as we do have higher timeframe bulls also participating in this market as of now. No long trades below PDL is the rule.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL.
- Banknifty is weaker than Nifty , so in case prices trade below PDL in Banknifty which would be also a breakdown 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.