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, Banknifty opened just above PDH and buyers pushed the price on the upside at the start. This was expected if sellers failed to give a follow through on downside. But after breaking IB high, prices came back not only within IB range but they also broke IB low on downside and tested POC area with a big down move, forming Neutral extreme down day. Now, this down move after failure of sellers at the open was something unexpected and this is perfect example of “Anything can happen” in markets. Now, we need to see if this anything continues as the close was very strong on downside (neutral extreme day has good conviction). In case of price acceptance inside previous day’s range, there will be no clarity as it would mean no follow through after such a bearish close and this Anything can happen again in case of exhaustion of bulls. So, till prices are not clearly accepted above or below previous day’s range, its time to stay out of market until they do.
What can be expected now:
The price action yesterday was not normal one, so we need to be cautious today. The acceptance inside previous day’s range will not give any clarity. Only if we break above or below previous day’s range decisively (please note decisively), then we can form an opinion in that direction, but until then, i will probably stay out and just observe what Market is trying to do. Also, I will be much comfortable with long trades above PDH than short trades below PDL.
PDH , PDL 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 swing low at 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 and there is no clarity at open auction. Also, till prices trade inside previous day’s range, the struggle between bulls and bears is expected to continue and I will stay out of that fight. I will look for trades only if prices are clearly accepted above PDH or below PDL, otherwise I will probably stay out of Market.
- Short trades are risky if prices trade above PDH.
- No long trade if prices trade below PDL.
- Banknifty is stronger than nifty now, so again both indices are showing some different signs and this is time to be cautious.
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.