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 Thursday, Nifty opened below PDL and also below swing low with a gap down and sellers failed to give a follow through further to downside (sellers not able to make use of opportunity). Responsive buying took prices back inside range and from there prices started almost one time framing upside and tested the previous day VWAP levels. The NVD up day was formed as a result. It is not usual to get one-time framing down and then one-time framing up on the next day. This shows that there is a struggle going on between buyers and sellers of higher timeframe which will make lower timeframe trading difficult. Also, since there is now a clear rejection in Nifty from swing low, sellers are not clearly in control until they go back and test below PDL again. Also, for buyers to be in control, they need to move prices up and close the selling gaps or get accepted above PDH. Till either of this happen, price might move sideways without much clarity.
What can be expected now:
We need to just observe market today to understand what is happening and not to look out for trades unless we have a clear opportunity. As there is a struggle between buyers and sellers, so until that resolves, price might move sideways, making short timeframe trading difficult. Only if prices breaks out clearly in one direction, we can think of taking a position in that direction.
PDH (14433) and PDL (14156) are the levels to look out for from previous day’s range. Above PDH , prices might test the gap zone 14535-4580 but we need to be careful of any exhaustion of buyers above PDH. Prices testing PDL is not good for buyers and this would mean that yesterday’s rejection is no more valid and we might move further down today or in coming day,s if not today.
Trade plan for today:
Nifty is expected to inside previous day’s range and there is no clarity at open auction. We need to wait to see where prices are getting accepted or rejected. I will probably wait for IB range completion to decide on a trade but in case of no clarity, I will probably stay out of markets for today.
- Short trades are risky if prices above PDH, but we can look for buyer’s exhaustion but still that trade will be risky.
- No long trade if prices trade below PDL, absolutely no.
- Banknifty is relatively stronger than Nifty, so for nifty to move in any direction, Banknifty should be supporting.
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.