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 above PDH with a huge gap up and sellers did try to fill the gap in the start but failed. This movemwent of Banknifty was same as Nifty and therefore we have same analysis and expecations today in Banknifty also. The prices after IB range moved sideway throughout the day inside IB range forming a non-trend day. These type of non-trend days happen when Market is waiting for some event but in this case, since it was a gap up (imbalance) market, this non-trend day could well signify absorption of supply or buyer’s exhaustion. Since, the sellers were not able to close the gap, absorption of supply look like the reason if we continue moving above PDH today. In case we are not able to trade above PDH, there can be a pullback (or inventory adjustment break) due to buyers exhaustion. But, till we are trading above Monday’s VWAP level (33100), I would infer that the buyers reponsible for Monday’s trend day are still in control and will look for long trades only. Only in case prices accept below that VWAP level, we need to be cautious on longs.
What can be expected now:
Today we need to see if buyers can take prices above PDH or not. There can be pullbacks due to buyer’s exhaustion (non-trend day yesterday) but these pullbacks are likely to be bought. Till we trade above the Monday’s VWAP levels of 33100, we can look for long trades. Only in case prices accept below 33100, we will change our bullish stance and look for short trades. There are good chances of another sideways move today overlapping previous day’s range.
PDH (34240) and PDL (33800) are the levels to watch out from previous day’s range. Above PDH, we can test the swing high few points above PDH from where sellers will again try to defend the upmove. Below PDL, we can look towards GAP closing levels of 33600 and below that we can test VWAP levels of 33100. Acceptance below 33100 is not good for buyers.
Trade plan for today:
banknifty is expected to open with a gap down following global cues and is expected to be very volatile at open. So, there is no clarity at open auction. We need to wait and observe for any level where buyers will provide support to look for a possible long trade. It better to wait for IB range completion in case of no clarity till then. Also, in case prices are accepted below 33100, I would not be looking for any long trade and most probably will not look for any trades in that case.
- Short trades are risky if prices trade above 33100.
- Long trades are risky if prices trade below 33100.
- There can be a pullback today which is likely to be bought, so be cautious of short trades.
- 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.