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 Tuesday, Banknifty opened inside previous day’s range and sellers agrresively took Banknifty down at open breaking PDL. After breaking PDL on downside, Banknifty consolidated in narrow range around IB low. Now this sideways consolidation can be absorption of Demand but for that, sellers need to move prices sharply down below this consolidation area. Otherwise , price might start moving up with shortcovering. So, PDL becomes and important zone to watch for today and we need to see if that prices break PDL on downside or not. For now, Banknifty looks to be in control of seller, the only thing we need to know is whether those sellers are from higher timeframe or not.
What can be expected now:
In Banknifty, sellers are in control and we need to see if they are able to break below PDL or not today. Also, incase prices do not break PDL and start moving up, there might be short covering which can push Banknifty more upside whcih will only add to bullishness in Nifty. So, we need to watch both indices in parallel to get more clarity on what we can expect.
PDH , POC and PDL are important levels from previous day’s range. I am bullish in Banknifty above POC and bearish below it. In case prices keep accepting below PDL in Banknifty, we can see prices falling further.
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 POC, but bulls have been showing exhaustion from so many days due to which I will take long trade if i get a very good opportunity only. Also, in case prices trade near or below POC, I will ignore any long trades in Banknifty and in case prices keep accepting below PDL, I will look for short trade.
- Short trades are risky if prices trade above POC.
- Long trades are risky if prices trade below POC.
- For any upside move in Nifty also, banknifty has to show relative strength as Nifty is at all time high and Banknifty has to catch up, but a breakdown in Banknifty can pull Nifty also down.
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.