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:
Similar to Nifty, on Monday, Banknifty opened with a gap down below PDL and sellers tried to push prices down immediately at open testing the virgin POC and weak lows below PDL but responsive buyers also entered immediately rejecting this down move and pushing the prices up. However, once prices went above IB high, the prices started moving sideways within the large IB range forming a kind of Normal day although prices broke IB high at end and closed above IB high. The value area was formed lower but what was to be observed yesterday is whether sellers can give a follow through to the downside or not. They tried but were not very successful. So, today, we need to see that the responsive buying that supported these prices is able to push prices upwards or not.
What can be expected now:
In the start, we need to observe if the prices are accepted above POC which is an important zone from short timeframe perspective. Prices accepting above POC has a higher chance of breaking above PDH and giving a good upmove. But, if prices stay below PDH for a longer period, that will be a caution for buyers even though they are accepting above POC. Price acceptance below POC will be in favour of sellers and we might move down in that case. SO, price observation today around POC becomes important.
PDH (32760) , POC (32425) and PDL (31625) are the levels to watch out from previous day’s range. Above PDH, we can test virgin POC at 33290 and 33720 and below PDL, we can test weak low at 31370 but then, if we test it, there is not much hope for buyers.
Trade plan for today:
Banknifty is expected to open inside previous day’s range near POC levels and there is not much clarity at open in Banknifty , as volatility is expected. So, I will ignore any trades in banknifty at open auction and will wait for IB range to form, so that I have a clear idea where prices are getting accepted and then take my direction accordingly. Price acceptance above POC is bullish and prices acceptance below POC is bearish .
- Short trades are risky if prices trade above POC.
- No long trade if prices trade below POC.
- Banknifty and Nifty have started moving in sync, so trades are usually good and easy if they both remain in sync. So, observe what Nifty is doing while taking a trade in Banknifty and vice versa.
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.