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, Banknifty opened below PDL with a big gap down and formed open high, means sellers were very aggressive from the start itself and pushed the prices lower even after a gap down open. This also is a breakdown from the sideways trend in Banknifty we had from few days. After the breakdown with a gap down open, prices continued its downward journey and formed NVD down day (NVD down because IB range was huge). After this break down, we need to observe when bears are aggressive and try to take entry in downward direction . Remember this thing, it takes more effort for market makers to move prices down, so trading in downtrend is always difficult as compared to trading upmoves and timing matters most when shorting in a down trending market. Also, this happens less than 30% of times, so if you are not comfortable, you can always ignore these down trend markets altoghter and still nothing to lose.
What can be expected now:
The prices accepting below PDL is not good for buyers and similarly prices accepting above PDL for too long is not good for sellers. Also, after the big down move yesterday, prices moved sideways at the lower end which might be absorbtion of demand which will be confirmed only if sellers give a follow through to downside.
PDH , POC (30920) and PDL are the levels to look out for from previous day’s range. Above POC, we can expect sideways to upmove and below POC , we can expect prices to test PDL. Acceptance below PDL is not good for buyers and we can see a further downmove but usually after a big down day like yesterday, price don’t move much next day (so be careful).
Trade plan for today:
Banknifty is expected to open inside previous day’s range and I would wait a watch if prices are breaking PDL decisivelyin Banknifty and also in Nifty to take a short trade. If any of these are not inline, I will ignore any trades at open auction in Banknifty. Later in the day, same observation that is at which levels with res[ect to POC and PDL, prices are getting accepted, we can plan a trade. In case of high volatility, we can also ignore Banknifty.
- 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. For Banknifty to move further down, Nifty also to support by trading below PDL.
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.