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, Nifty opened above previous day’s range and also at a new high and consolidated at area around open for almost half a day. Then it went down to close the gap zone and test near PDH from where buying emerged and pushed the prices back up to close above IB high forming a neutral extreme up day. This type of Neutral days demonstrate less conviction from both buyers and sellers and struggle and they usually happen at all time highs. Also, the value area has moved up , so whereas the bulls are still in control on higher timeframe, the move is getting challenged by sellers. So, these type of moves (poor trade facilitation by bulls or struggle between buyers and sellers) will continue for some more days unless this resolves with either a breakout move on upside or an inventory adjustment break on downside. The more time this struggle continues, more sharper and deeper will be the IAB (downside swing).
What can be expected now:
As of now, we are expecting same thing to continue, that is prices to continue up but with a lot of struggle as it looks like only higher timeframes are driving prices higher. There is no reason to be bearish until we keep forming higher value areas. We will get our caution when it comes. But trading is going to be difficult because of these poor trade facilitation.
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 is no man’s land means we will make a new high, so nothing much can be said about that area except that if we continue accepting higher prices, we will keep moving higher. Acceptance below PDL is not good for buyers and we might test virgin POC in that case.
Trade plan for today:
Nifty 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 tards 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 PDL
- 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.