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, Banknifty opened above previous day’s range and buyers tried to move prices up with OTD up at PDH but failed to take prices above virgin POC levels. Then sellers pushed the prices back inside previous day’s range to test POC levels where there was expected support by buyers and prices ended up moving sideways but closing inside previous day’s range forming a NVD down day. Now, even though value area has moved up, this was no a good trade facilitation by bulls, so if we do not get good move on upside, this kind of exhaustion can be utilized by sellers to move prices down.
But only thing supporting Banknifty is that Nifty was strong, so in case Nifty shows further strength, we can see Prices moving up in Banknifty and they can move up sharply due to short covering effect, So we need to see if prices are accepting above previous day’s range or gets rejected above previous day’s range.
What can be expected now:
Banknifty is weaker than Nifty which means sellers have a more relative strength in banknifty. This indicates lot of short interest and i that can lead to a good resistance and sharp upside move due to short covering. We need to observe what happens today and in coming days. In case of price acceptance above PDH, we can look for long trade and in case of price rejection above PDH , we can look for short trades.
PDH (33360) and PDL (32850) are the levels to watch out from previous day’s range. Above PDH, we can test virgin POC at 33700 and acceptance above that can take price upside to test swing high at 34300 levels. Below PDL ,we can test weak low at 32650 but any acceptance even below PDH is not good for buyers now.
Trade plan for today:
Banknifty is expected to open above PDH with a gap up and we can expect high volatility in banknifty at open So, better to stay out. I will wait for sometime to observe where prices are getting accepted in Banknifty. I will look for a long trade only in case prices trade above PDH, otherwise I will wait for IB range formation observing the same thing, but if prices trade inside previous day’s range, I will be no more bullish on Banknifty.
- Short trades are risky if prices trade above PDH.
- No long trade if prices trade below PDH.
- Banknifty should give a good move upside today but in case it does not, we need to be cautious about the intention of bulls.
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 abov