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 Friday, Nifty opened just below PDL and responsive buyers tried to push prices up at the start and were able to test area near POC/HVN but were met with sellers. Prices then consolidated inside previous day’s range and IB range for sometime but at the end, broke on the downside closing at the bottom, forming a NVD down day. This was the first day of May series and we can say prices were in control of bears, but we need to see if these sellers are able to follow through to the downside. As of now, this down move can only be considered as Inventory adjustment break (or pullback) in the higher timeframe but next 1-2 days are very crucial and if we continue moving down , then things will change. So case, buyers want to take prices up, they need to provide support to the falling prices as soon as possible.
What can be expected now:
We need to observe if the prices are accepted or rejected below PDL, which means that whether sellers are able to follow through to the downside with a good trade facilitation or not. But, two things will be in favour of buyers – 1) Any rejection below PDL and prices back inside previous day’s range. 2) Poor trade facilitation by sellers.
14375-14475 is a very important zone on downside on higher tiemframe also. If prices accept below this zone and there is no support from buyers, then buying will become risky on the higher timeframe also including swing trading.
PDH (14890) , POC (14825) and PDL (14660) are the levels to watch out from previous day’s range. Above PDH, we can test poor high and below PDL, virgin POC (14585) and weak low (14475) are the levels to watch out for.
Trade plan for today:
Nifty is expected to below previous day’s range with a big gap down and therefore, we can expect high volatility at open. So, I will ignore any open auction trade and wait and see trade facilitation by sellers after initial initiative selling (gap down). There is no point looking for a long trade below PDL and later below IB low but we can look for a long trade at rejection of any of these levels only if price stays above 14475, otherwise not. Also, only in case of good trade facilitation by sellers, we can look for short trades.
- Short trades are risky if prices above PDL and later above IB low.
- No long trade if prices trade below PDL and IB low.
- We have seen sellers gaining control on first day of the new series. So, we need to carefully observe if sellers’ control continues for 1-2 more days or not. In case it continues, we can assume the buying we saw previous weak was not from a higher timeframe otherwise In case it was, this down move can just be a pullback.
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.