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 near POC and buyers took the prices up from the start and broke PDH decisively. After that, Banknifty moved up in one-timeframe forming a trend day on upside and closing at the top. This was a nice bullish day in Banknifty which would have trapped many shorters and we can expect this momentum to continue upside today as well. It also becomes important to see if there is a any exhaustion by buyers or poor trade facilitation above PDH as there are chances of short inventory adjustment breaks in that case. But as long as buyers are able to follow through prices on upside, we can expect upside momentum to continue.
What can be expected now:
There was a strong move in both Nifty and Banknifty yesterday. This momentum is likely to continue today and we need to observe the trade facilitation by buyers above PDH. But in case of any poor trade facilitation by buyers, there might be inventory adjustment breaks which we need to be cautious if we are looking for a long trade.
PDH (33600) , VWAP ( 33100) and PDL (32350) are the levels to watch out from previous day’s range. IN case of acceptance above PDH, we can test swing high at 34290 and acceptance above that can take prices to 34600-34800 levels. Prices accepting below VWAP or even below PDH is not good for buyers and in that case , we can test PDL and weak low at 32200.
Trade plan for today:
Banknifty is expected to open above previous day’s range with a gap and I will look for open auction long trades only if gap is small or if prices test PDH. In case of big gap, I will wait and watch. Swing high at 34300 is levels to observe for price action on the upside. Its always better to wait for prices to settle down in case of big gap up open before planning a trade. There is no point looking for a short trade if prices are accepted above PDH, similarly no point looking for a long trade below PDH or below VWAP.
- Short trades are risky if prices trade above PDH
- Long trades are risky if prices trade below PDH.
- Banknifty and Nifty have both showed signs of strength and are again in sync which is good sign for 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 above statements Indicate Banknifty future for current month and not Banknifty index.