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 Tuesday, Banknifty opened inside previous day’s range near POC and sellers tried to take prices down at open but were not able to even test PDL and buyers took the prices up. After IB range formation, price broke on upside and tested PDH forming a NVD on upside. This up-move that happened at the end of the trading looks like a forced up move, so there are chances, we might come back and test POC(31251) levels if we fail to get a follow through on upside. Strangely, Banknifty was stronger than Nifty on Tuesday and we need to observe how and in which direction, this discrepancy resolves today.
What can be expected now:
The prices accepting above PDH is not good for sellers but I am expecting a sharp rejection from sellers above PDH in case the higher timeframe sellers are still interested in taking prices down. So, if there is no rejection, we need to be cautious on the short side. There is buying from smaller timeframe that happened in Tuesday, so VWAP at 31460 levels become important for buyers to hold. Prices accepting below 31460 levels is not good for buyers.
PDH (32010) , VWAP (31460) and PDL (30770) are the levels to look out for from previous day’s range. Above PDH, we can expect prices to test 32250 and 32600 levels. Today is expiry, so we can also expect a sideways move inside previous day’s range where VWAL (31460), POC (31250) might act as support but acceptance below It will take prices to test PDL sideways to upmove and below POC , we can expect prices to test PDL.
Trade plan for today:
Banknifty is expected to open near to PDH and there is not much clarity at open auction. So , we can avoid any open auction trades in Banknifty and wait for IB range completion. IN case of sideways move and not much clarity after IB range also, we can ignore any Banknifty trades today as today is also weekly expiry.
- Short trades are risky if prices trade above PDH.
- No long trade if prices trade below POC..
- Also, watch out for strength/weakness in Nifty. In a down trending markets, prices move sharply down only in case a higher timeframe becoming active, so when a down move happens in bear market, it reflects in both indices, in fact everywhere. So, until there is a discrepancy between indices, the struggle will likely continue.
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.