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 Thursday, Banknifty opened above previous day’s range and consolidated at area around open for almost half a day. Then it went down to close the gap zone and test PDH from where buying emerged and pushed the prices back up to close above IB high forming a NVD up day. Banknifty is not showing a clear breakout from the sideways consolidation range as of now. This demonstrate less conviction from both buyers and sellers and struggle might continue until we breakout above or below this consolidation zone.
What can be expected now:
On higher timeframe, sideways consolidation yesterday looks like absorption of supply but for that, prices have to move up today and give a breakout, else it can turn into buyer’s exhaustion also. So, today we need to observe price action and see if we break above PDH or accept below PDL .
PDH , POC and PDL are important levels from previous day’s range. We can look for price acceptance beyond previous day’s 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 open inside previous day’s range and there is not much clarity at open auction. I am bullish if prices trade above PDL, so, I will probably look out for only long trades in that case. I am not in favour of shorting unless I good a very very good opportunity.
- Short trades are risky if prices trade above POC
- Long trades are risky if prices trade below PDL
- For any upside move in Nifty also, banknifty has to show relative strength as Nifty is trading near all time high and Banknifty has to catch up.
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.