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 Friday, Banknifty opened above previous day’s range and test PDH and buyers tried to move prices up in start but failed. Selllers than took control and pushes the prices back inside previous day’s range but there were also no able to follow through and test PDL. So, for ret of the day , Banknifty moved sideways and formed a NVD down day. There is not much clarity on Banknifty as of now and we need to look if we see any good strength in banknifty in coming days, otherwise we are susceptible for a big inventory adjustment break in both – Nifty and banknifty.
What can be expected now:
Nifty is slowly moving up but Banknifty nifty is not supporting this upmove of Nifty. We need to see the trade faciliation by both buyers and sellers now (especially in Nifty) and probably wait for clarity on control , which will come with a big move – either upside or downside. But until then, this discrepency between Nifty and Banknifty might continue.
PDH and PDL are important levels from previous day’s range. We can look for price acceptance beyond this range or price rejection beyond this range to initiate a directional trade but if the trade facilitation is poor, any trades in any direction would be risky.
Trade plan for today:
Banknifty is expected to above previous day’s range and we need to observe trade facilitation beyond previous day’s range. In case trade facilitation is not very clear, I will wait for IB range formation and then decide on a trade on rejection of levels (mean reversion trades) but if there is not much clarity, I will choose to ignore trades in banknifty.
- Short trades are risky if prices trade above PDH
- Long trades are risky if prices trade below PDL
- Too much exhaustion by bulls in moving prices up is not good for buyers. So, lets see if this continues today or not.
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.