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 Monday, Nifty opened with a gap down below PDL and sellers tried to push nifty down immediately at open testing the weak low levels of 14475. The responsive buyers also entered immediately rejecting this down move and pusing the prices up. However, once prices went above IB high, there was a sideways consolidation for very long time below PDL which looks like buyers were absorbing the supply. This is because of the reason that towards the end of the day, buyers pushed the prices back inside previous day’s range forming a NVD up day.
So, yesterday, we wanted to observe whether sellers can give a follow through to the downside or not. They tried but were not very successful. The only point in their favour is that value area was formed lower yesterday than previous day, so, if we see again a selling and breaking of PDL, we can assume that sellers are from higher timeframe but in case we do not even test PDL or continue moving upwards, then, there is a very high chance that this pullback was because of short timeframe sellers and can be called as Inventory Adjustment Break.
What can be expected now:
There was a lot of consolidation near PDL yesterday whcih becomes today’s POC (14600 levels). So, we need to observe if prices are getting accepted above of below this level. Acceptance above 14600 is bullish and acceptance below 14600 is bearish. Also, the price action might be sluggish at the open and we might see a good momentum in either direction once we break beyond the previous day’s range (14450-14750). Also, rejection above or below POC need to be carefully observed.
PDH (14750) , POC (14600) and PDL (14460) are the levels to watch out from previous day’s range. Above PDH, we can test virgin POC at 14825 and above the next virgin POC which is also weak high. Below PDL, we can test swing low levels but price acceptance below PDL can give a good downside move.
Trade plan for today:
Nifty is expected to open inside previous day’s range near POC levels and I would be looking for a long trade if – prices break PDH at open or Prices get rejected below POC. As, i am bullish only if prices are accepted above POC (14600 levels), I will look for a long trade only in that case. Otherwise, if price accept below 14600 levels, I might look for a short trade.
- Short trades are risky if prices trade above POC.
- No long trade if prices trade below POC.
- Today seems to be crucial day after buyers defended the down move yesterday. So , we need to see if buyers can push prices further up and gain control or the struggle will 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, Nifty in above statements Indicate Nifty future for current month and not Nifty index.