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 just above previous day’s range and we were expecting buyers to give follow through on upside, but they failed. Responsive selling took prices back inside previous day’s range but sellers also were not able to test POC levels. We were having a bullish view as long as prices trades above 15100 and for the entire day prices traded above 15100, so this warning would have prevented any short trades. Now, Nifty formed a non-trend day at the top of previous day’s range, so this could be exhaustion or absorption of supply. There are higher chances of absorption of supply as we already had a inventory adjust break (or pull back) on higher timeframe but we need a follow through upside by bulls above PDH for confirmation of absorption of supply. Also, we are now approaching all time high in Nifty, so things can be expected to be volatile as many timeframes would not be involved (almost all if we test all time highs). Only in case we start accepting below PDL, we can assume bulls exhaustion and more sideways move on higher timeframe to continue.
What can be expected now:
Today again, we need to see if bulls are able to follow through to the upside above PDH or not. Then only we can assume that the non-trend day of yesterday was absorption of supply by higher timeframes. So, we would be having a bullish view if price trades above PDH. In case prices fail to accept above PDH, I would be having a sideways to slight bearish view but I might ignore short trades.
PDH (15259) , POC (15202) and PDL (15150) are the levels to watch out from previous day’s range. Above PDH, we can test virgin poc (15300), swing high (15375) and all time high (15430). Below PDL , we can go back to test virgin POC of 15100 and 15100 level is very important for higher timeframes also and we might see a support coming there. Below 15100, bulls would be in trouble.
Trade plan for today:
Nifty is expected to near PDH and I would look for price auction at PDH to take a long trade. In case there is OTD up at PDH, I will look for a long trade but we need to be careful, so we can opt for less position size or opt to wait a little more. Also, till price trades above PDL levels, I will look for long trades only. No shorting if price trades above PDL or infact no short trades if price trades above yesterday’s POC (15100). .
- Short trades are risky if prices trade above virgin POC (15100)
- Long trades are risky if prices trade below virgin POC (15100)
- We have a breakout on Friday and a non-trend sideways move on Monday. So, price action today will give some more clarity on what was happening in that non-trend day sideways move.
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.