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 Wednesday, Nifty opened inside previous day’s range but below POC and sellers aggreesively tried to break PDL at open. The prices after breaking PDL consolidated near PDL and though it looked like there is an absorption of demand going on and prices might fall further later, the prices after testing and getting rejected below IB low were driven sharply up towards the end forming a NVD up day but with a d shape profile (indicating short covering). Now, will this shortcovering continue and move prices higher or will we come again and test the HVN from where this short covering started needs to be observed.
What can be expected now:
We need to see if buyers are able to follow thorough upside after the last hour upmove which means if prices accepts above PDH, we can see a continued rally and more short covering. But in case prices are not able to follow through above PDH, we might come back down and test POC levels which will again act as a support. So, unless we break PDL decisively, there is no point looking for short trades and prices will be in control of bulls (buyers from different timeframes depending on the price action on Nifty).
PDH , POC and PDL are important levels from previous day’s range. I am bullish above POC and will only be bearish below PDL. Above PDH, we can test all time high which is also poor high and acceptance above that is no man’s land. Acceptance below PDL is not good for buyers and we might see a sharp fall in that case.
Trade plan for today:
Nifty is expected to open above previous day’s range and we can plan a long trade in case of OTD up at PDH. In case of a gap open, I will wait for prices to test either PDH and get rejected or will wait for IB range formation. Also, today is expiry, so we need to be aware of any sideways move but also, there can be a big move today if market opens out of balance and remains like that. Banknifty has been weak and is consolidating sideways from last 4 days, so we can observe a breakout or no/false breakout in Banknifty to get a confirmation on our Nifty trades. Until prices trade above POC, i will be looking for long trades only.
- Short trades are risky if prices trade above POC
- Long trades are risky if prices trade below PDL.
- Banknifty is weaker than Nifty or we can say that Nifty is showing sluggish upmove due to weakness in Banknifty. So, price action in Banknifty becomes important thing to watch for.
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.