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, Banknifty opened inside previous day’s range and buyers tried to move prices up above PDH quickly but were immediately rejected and price move back inside previous day’s range only to struggle near PDH for the entire day forming another non-trend day. Now, even though value area has moved up, this was not a good trade facilitation by bulls for another day and as we talk about in last post, if we do not get good move on upside, this kind of exhaustion can be utilized by sellers to move prices down. So, today looks like will be important day to see if prices are being supported by higher timeframe buyers or this exhaustion starts a downward movement with yesterday’s high forming a swing high.
What can be expected now:
Banknifty is weaker than Nifty which means sellers have a more relative strength in banknifty. Also, yesterday with a gap up open in nifty, buyers were given an opportunity to take prices higher but they had failed at least in Banknifty (Nifty still traded above PDH). So, today, we need to observe in there is price acceptance above PDH and PDH is not even tested nd forms a swing high. Also, for sellers, trade facilitation below PDL matters just like trade facilitation mattered for buyers above PDH.
PDH (33500) and PDL (33160) 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 virgin POC at 33050 and below that weak low at 32850 and 33650 but any acceptance below 33650 will not be good for buyers on higher timeframe also.
Trade plan for today:
Banknifty is expected to open below PDL with a gap down open and there is an expected huge volatility at open, So i will ignore any open auction trades and will wait for IB range and see the levels where IB range is forming. Then based on that, we cna plan for long trades above IB high and short trades below IB low later in the day. Also, in case of short trades, the trade facilitaton downside by sellers is very important and should be good.
- Short trades are risky if prices trade above PDL and later above IB high.
- No long trade if prices trade below PDL and later below IB low.
- Banknifty continued its weaknedd on Monday, so in case of any down move, Banknifty is expected to fall more than nifty but in case it does not happen, then we need to be cautious on short side also.
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.