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, Nifty opened with a big gap up in the sellers gap area from Monday above PDH and buyers did try to take the prices up but failed. So, even though this was gap up, there was no follow through on upside. Sellers pitched in and the then for almost entire day, nifty one-time-framed downside forming a trend down day and closing near PDL. There was some responsive buying in last few minutes which managed to keep nifty above PDH but this leaves a weak low which has good chances to be tested. Acceptance below PDL is not good for buyers and in case buyers want to have any control, they need to rejected prices below PDL and keep them above PDL. For now, Sellers look like dominating even on higher timeframe .
What can be expected now:
We need to see today if we get a follow through on the downside or not by the sellers. IN case of no follow through on downside, prices can move sideways to upside. Today is also weekly expiry so sideways movement will favour option writers but in case there is a clear acceptance below PDL, prices can drift downwards and test area near 14000.
PDH (14535) , VWAP (14392) and PDL (14225) are the levels to look out for from previous day’s range. Above PDH , we will close the gap at 14580 and even go to 14650 but this is less likely today looking at the higher timeframe sellers dominance. Below PDL and only on clear acceptance below PDL, we can see prices moving down to test 14000 nearby levels and in case that also breaks, we can move down to 13800 which is a very strong support.
Trade plan for today:
Nifty is expected to open near PDL and there is expected volatility at open due to Wednesday holiday (price adjustments are likely to happen at open). So, we need to observe for sometime where prices are getting accepted or rejected before deciding on direction of trade. acceptance below PDL is bearish and acceptance above PDL is bullish. Also, today is expiry, so we need to be aware of that and can look out for any exhaustion for a counter trade in second half.
- Short trades are risky if prices above PDL.
- No long trade if prices trade below PDL.
- Banknifty is relatively stronger than Nifty, so for nifty to move down, it is good if Banknifty also breaks poor low/swing low. otherwise it will prevent Nifty from falling. So keep eye on Banknifty also.
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.