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, Nifty opened below PDL with a big gap down and formed open high, means sellers were very aggressive fromt he start itself and pushed the prices lower even after a gap down open. Then, throughout the day Nifty continued its downward journey and formed NVD down day. In this course, it broke the swing low and formed a lower low on the daily charts also signalling a continuation of downtrend. Now, no one can tell you what will happen in future, so the best thing we can do is have some context from the past and observe the present. So, we need to take trades based on our daily observations about exhaustion of buyers or exhaustion of sellers. 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.
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 can be absorbtion of demand or absorbtion of supply as we are near another swing low, so POC at 14375 also becomes another important level acceptance above this level would indicate the sellers are not ready to move prices further down.
PDH , POC (14375) 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 downmove further but 14260 is also important as it is swing low , so we can expect some other timeframes to enter the market below 14260 levels (be careful with that).
Trade plan for today:
Nifty is expected to open inside previous day’s range near POC and I would take a shot trade in case prices show open-high and break PDL but as I said, below PDL 14260 is important level, so unless 14260 decisively breaks, short are risky, so we need to be careful. Also, there is no point looking for a long trade until prices comfortably accept above POC (14375) for lareger duration. Trade at later half depends on where prices are accepting/rejecting based on the above analysis.
- Short trades are risky if prices above POC (14375).
- No long trade if prices trade below POC (14375).
- Only in case price accept below swing low (14260), we can see a good downmove, else we might have a sideways day.
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.