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 above previous day’s range with a gap up and there was selling at the start but it was not sufficient enough to even test PDH. But buyers were also struggling to take prices above IB high and Nifty ended the day as sideways day forming a NVD up or more like a non-trend day. Also, there was resistance above 15000 levels as expected as we were expecting higher timeframe sellers to enter at that level. Now, due to this sluggish move, we can expect an inventory adjustment break (small correction), so time to be cautious. It looks like price action today will be important to decide whether selling above 15000 levels have the potential to turn markets around or this selling will also be absorbed by the buyers and then we move higher.
What can be expected now:
The price action last day was bullish as it was above PDH and value area also moved up but this was also sluggish and hence we need to see if buyers are able to give a follow through on upside and sustain, which means if we get upside move, we should also get acceptance above and not rejections due to other timeframe sellers overcoming the buying. Acceptance above PDH is good for buyers and acceptance below PDL is not good for buyers.
PDH (15022) and PDL (14935) are the levels to watch out from previous day’s range. Above PDH, we can test poor high at 15080 and below PDL , we can close the gap by testing 14905 levels and below that virgin POC at 14850 and another gap level at 14785 is important. Acceptance below 14785 is not good for higher timeframe buyers also and only then we need to be cautious on long timeframe buyers.
Trade plan for today:
Nifty is expected to open with a big gap down as indicated by SGX nifty and we need to see if this gap down open is bought by the buyers as an opportunity, or if prices are accepted at gap down level and move further down. Open auction will be volatile , so any trades at open auction are risky. I will wait for IB range completion today to look for any trades. Acceptance below PDL is good for short trades but we need to wait for IB range and look for shorts only below IB low. Acceptance above IB high or above PDL would mean higher timeframe buyers are interested in buying the dips, so we can look for long trades in that case.
- Short trades are risky if prices trade above PDL.
- No long trade if prices trade below PDL.
- Banknifty is being weaker than Nifty. So, there is risk in any trade unless both indices re in sync.
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.